VOL.  XII  \ 
No.  15   / 


INDIANA  UNIVERSITY  BULLETIN         {  jAN1}o?I  15' 

I.         1915 


HJ 


SECOND  ANNUAL  CONFERENCE 


ON 


TAXATION   IN   INDIANA 


Under  the  Auspices  of 


The  Extension  Division  of  Indiana  University 
and  the  Indiana  State  Tax  Association 


Held  in  the  Claypool  Hotel,  Indianapolis, 
on  December  1  and  2,   1914 


For  Sale   by  the  University  Bookstore,  Blooming  ton,  fad.         Price  25  Cent;* 


GIFT  OF 


VOL.  XII  \ 

No.  15    / 


INDIANA  UNIVERSITY  BULLETIN 


J  ANITA  HY    15, 

1915 


PROCEEDINGS   OF  THE 


SECOND  ANNUAL  CONFERENCE 


ON 


TAXATION   IN   INDIANA 


Held  in  the  Claypool   Hotel,    Indianapolis, 
December' ;i- 'and  2,    1914 


Under  the  Auspices  of 

The  Extension  Division  of  Indiana  University  and  the 
Indiana  State  Tax  Association 

Bloomington,   Ind. 

Published  by  The  Extension  Division  of  Indiana  University 
1915 


\1 


COPYRIGHT,  1915 
BY  INDIANA  UNIVERSITY 


Contents 


PAGE 

PREFATORY  NOTE 5 

i.   INTRODUCTORY- 
ADDRESS  OF  THE   PRESIDING  OFFICER.    By  Hon.   Samuel  M. 

Ralston,  Governor  of  Indiana 7 

SOME  PRINCIPLES  OF  TAXATION.     By  William  A.  Rawles 8 

II.     PUBLIC  EXPENDITURES- 
INCREASING  DEMAND  ON  THE  STATE  AND  THE  STATE  REVENUE. 

By  Hon.  William  H.  O'Brien 16 

MUNICIPAL  FINANCIAL  PRESSURE.     By  John  C.  Williams 19 

PROBLEMS  OF  COUNTY  FINANCE.     By  Lewis  S.  Bowman 26 

PROBLEMS  OF  TOWNSHIP  FINANCE.     By  James  E.  Berry • .  .  36 

GROWTH  OF  TAXES  AND  PUBLIC  EXPENDITURES.     By  John  L. 

Coulter 43 

SUMMARY  OF  THE  FIRST  SESSION.     By  Thomas  F.  Moran 53 

III.  EFFECT  OF  HIGH  TAX-RATES— 

TAX-RATES  IN  INDIANA  AND  THEIR  TENDENCY.     By  Eben  H. 

Wolcott 59 

How  HIGH  TAX-RATES  AFFECT  TANGIBLE  PROPERTY  (REAL 

ESTATE).  By  J.  Edward  Morris 67 

How  HIGH  TAX-RATES  AFFECT  MANUFACTURERS.  By  A.  M. 

Glossbrenner 73 

How  THE  FARMER,  THE  LARGE  TAXPAYER,  is  INTERESTED  IN 

TAXATION.  By  Dane  S.  Dunlop 78 

SUMMARY  OF  THE  SECOND  SESSION.  By  William  A.  Rawles 91 

IV.  WHAT  OTHER  STATES  ARE  DOING— 

SOME    PHASES    OF    TAXATION    IN    MINNESOTA.     By   James    W. 

Putnam 95 

WHAT  WISCONSIN  is  DOING.  By  Alfred  F.  Potts 100 

THE  OPERATION  OF  THE  NEW  TAX  SYSTEM  IN  OHIO.  By  Oliver 

C.  Lockhart.  . 110 

THE  REVENUE  SYSTEMS  OF  NEW  YORK  AND  PENNSYLVANIA.  By 

Frank  T.  Stockton 114 

WHAT  NEW  ENGLAND  is  DOING  TO  MODERNIZE  TAXATION.  By 

E.  I.  Lewis 120 

THE  CALIFORNIA  SYSTEM  OF  TAXATION  AND  WTHAT  THE  PEOPLE  OF 

INDIANA  MAY  LEARN  FROM  IT.  By  Uz  McMurtrie 126 

SUMMARY  OF  THE  THIRD  SESSION.  By  John  L.  Rupe 132 


333178 


k  INDIANA    UNIVERSITY 

V.  THE  REMEDY  IN  INDIANA—  PAGE 

\\  H  \  i  IN  WRONG,  SYSTEM  OR  ADMINISTRATION?  By  Dan  M.  Link  137 

Tin:  BUDGET  SYSTEM.  By  John  A.  Lapp 144 

THE-  CLASSIFICATION  OF  PROPERTY  FOR  TAXATION.  By  Evan  B. 

Stotsenburg 151 

WHAT  CAN  BE  ACCOMPLISHED  UNDER  PRESENT  CONSTITUTIONAL 

LIMITATIONS.  By  M.  M.  Bachelder 158 

DISCUSSION 168 

APPENDIXES— 

A.  LIST  OF  PERSONS  ATTENDING  THE  SECOND  CONFERENCE  ON 

TAXATION 177 

B.  GENERAL    COMMITTEE    ON    TAXATION    APPOINTED    BY    THE 

EXECUTIVE    COMMITTEE    OF  THE    INDIANA    STATE  TAX 

ASSOCIATION 185 

C.  CONSTITUTION  OF  THE  INDIANA  STATE  TAX  COMMISSION 186 

D.  ANALYSIS  OF  TAX  RATES  IN  INDIANA 188 

E.  SOME  REFERENCES  ON  TAXATION 192 


Prefatory  Note 


The  second  Conference  on  Taxation  in  Indiana  was  held  at 
Indianapolis,  December  1  and  2,  1914,  under  the  auspices  of  the 
Indiana  State  Tax  Association  and  the  Extension  Division  of  In- 
diana University.  The  purposes  of  the  Conference  were  to  consider 
the  defects  of  the  present  tax  system,  what  other  States  are  doing  to 
improve  their  systems,  and  what  may  be  done  in  Indiana  to  correct 
the  existing  evils. 

Upon  invitation  delegates  were  appointed  by  the  Governor  of 
the  State;  officials  of  cities,  towns,  and  counties;  officers  of  State 
and  local  commercial,  occupational,  financial,  horticultural,  agri- 
cultural, and  professional  societies;  central  labor  unions  of  cities; 
colleges  and  universities;  and  the  Indiana  Federation  of  Women's 
Clubs.  It  was  gratifying  to  note  that  a  large  number  of  these  dele- 
gates were  present  and  that  all  sections  of  the  State  were  repre- 
sented. The  sessions  were  open  to  the  public  and  the  large  attend- 
ance showed  the  wide  interest  in  the  subject  of  taxation.1  The 
program  as  announced  was  carried  out  with  two  exceptions :  Hon. 
William  H.  O'Brien  and  Hon.  Warren  Bigler  were  unable  to  at- 
tend. The  paper  of  Mr.  O'Brien,  however,  appears  in  the  pub- 
lished proceedings.  The  paper  of  Mr.  Dunn  has  been  omitted. 
With  two  exceptions  the  speakers  were  all  citizens  of  Indiana, 
Many  of  them  have  had  practical  experience  in  the  administration 
of  the  tax  laws  and  were,  therefore,  enabled  to  speak  with  author- 
ity concerning  the  operation  of  the  system. 

The  Conference  was  called  to  order  by  William  A.  Rawles, 
President  of  the  Indiana  Tax  Association.  It  was  organized  by 
electing  Mr.  Rawles  permanent  chairman  and  Fred  Bates  Johnson 
secretary,  and  by  authorizing  the  chairman  to  appoint  a  committee 
on  credentials  to  consist  of  one  member  from  each  congressional 
district  and  a  committee  on  resolutions  to  consist  of  seven  persons. 
Later  in  the  day  the  authorized  committees  were  appointed  as 
follows : 

Committee  on  Credentials. — Carl  Lauenstein,  Evansville ;  Mason 
J.  Niblack,  Vincennes ;  Charles  L.  Jewett,  New  Albany ;  Joseph  M. 

XA  list  of  those  who  registered  is  given  in  the  appendix.      Many  others  who  attended  did  not 
register. 

(5) 


I    \  I  VKHSITY 

Cravens,  Madison:  T.  1).  Brookshire,  Roachdale;  John  M.  Lontz, 
Richmond;  Evans  Woollen,  Indianapolis;  G.  G.  Williamson, 
Muncie;  Samuel  T.  Artman,  Lebanon;  Geiorge  P.  Haywood,  In- 
dianapolis; John  R.  Browne,  Marion;  Anthony  Deahl,  Goshen; 
Samuel  M.  Foster,  Fort  Wayne. 

Committee  on  Resolutions. — Lewis  S.  Bowman,  Richmond ; 
Marcus  Sonntag,  Evansville ;  Thomas  F.  Moran,  LaFayette ;  James 
A.  Houck,  Indianapolis;  T.  C.  McReynolds,  Kokomo;  Aaron  Jones, 
South  Bend;  Fred  A.  Sims,  Frankfort. 

After  the  completion  of  the  organization  the  presiding  officer 
of  the  session,  Hon.  Samuel  M.  Ralston,  Governor  of  Indiana,  was 
presented.  He  called  attention  to  the  increasing  financial  demands 
HIM  do  upon  governments  and  the  need  for  thorough  study  of  the 
important  question  of  taxation.  The  general  theme  of  the  first 
session  was  Public  Expenditures.  A  summary  of  the  papers  read 
will  not  be  attempted  here.  The  presiding  officer  of  the  afternoon 
session  was  John  H.  Holliday,  President  of  the  Union  Trust  Com- 
pany. The  general  subject  for  discussion  was  the  Effect  of  High 
Tax-Rates.  At  the  morning  session  of  the  second  day  Mr.  Charles 
F.  Remy  presided  and  the  discussion  was  centered  upon  What 
Other  States  Are  Doing.  At  the  last  session,  with  Mr.  John  B. 
Stoll  presiding,  the  Conference  considered  What  Is  the  Remedy  in 
Indiana  ? 

The  Committee  on  Resolutions  submitted 'the  following  resolu- 
tion, which  was  adopted: 

Resolved,  That  the  Executive  Committee  of  the  Indiana  State 
Tax  Association  be  and  is  hereby  requested  to  appoint  a  committee, 
representing  all  classes  of  property  in  the  State  of  Indiana  subject 
to  taxation,  with  a  view  to  evolving  a  system  of  taxation  that  will 
be  just  and  equitable  to  all  the  taxable  interests  of  the  State.2 

'The  membership  of  the  committee  as  subsequently  appointed  is  found  in  the  appendix. 


Second  Conference  on  Taxation  in  Indiana 


I.    INTRODUCTORY 


ADDRESS  OF  PRESIDING  OFFICER 
HON.  SAMUEL  M.  RALSTON,  Governor  of  Indiana 

I  have  but  a  word  for  you  this  morning.  It  is  suggestive  that 
I  have  been  called  upon  to  preside  over  this  particular  session  of 
your  Conference.  I  note  that  the  subject  assigned  for  discussion 
this  morning  is  "Public  Expenditures."  I  have  a  faint  impres- 
sion of  having  heard  something  said  upon  that  subject  during  the 
recent  campaign.  (Laughter.)  Of  course  you  would  not  expect 
me  to  admit  that  it  rose  to  the  dignity  of  a  discussion,  but  I  will 
concede  that  it  was  said  with  considerable  vehemence. 

Public  expenditures,  gentlemen,  at  once  direct  our  attention  to 
the  greatest  power  of  government,  the  power  to  levy  taxes.  The 
abuse  of  this  power  had  so  much  to  do  in  the  formation  of  the 
American  Republic  that  the  American  people  are  more  alert  re- 
garding its  exercise  than  they  are  upon  any  other  power  of  their 
government.  It  is  commonplace  to  declare  in  this  country  that 
the  power  to*  tax  is  the  power  to  destroy.  That  is  another  way  of 
saying  that  in  the  absence  of  a  constitutional  or  a  statutory  inhibi- 
tion those  charged  with  the  responsibility  of  raising  or  levying 
taxes  may  become  oppressors. 

We  boa&t,  and  rightfully,  of  our  form  of  local  self-government 
in  this  country,  but  we  do  not  always  recognize  our  failure  to  per- 
form our  duties  as  citizens  to  that  government.  The  people  must 
say,  in  many  instances,  for  what  purposes  taxes  shall  be  levied. 
This  occasion  affords  a  good  opportunity  to  point  out  how  the  bur- 
dens of  the  people  are  increased  through  their  failure  to  discharge 
their  duties  as  citizens,  and  that  fact,  I  hope,  will  be  pointed  out  in 
your  deliberations. 

The  machinery  of  government  cannot  be  operated  without 
taxes.  Every  time  that  machinery  is  enlarged  through  the  failure 
of  the  people  to  discharge  their  duty  to  their  government,  or  other- 
wise, taxes  are  necessarily  increased.  I  think  we  might  as  well 

(7) 


8  INDIANA   UNIVERSITY 

reconcile  ourselves  to  the  fact  that  taxes,  in  our  State  and  in  our 
nation,  will  not  be  lower,  generally  speaking,  than  they  are  at  the 
present  time. 

But  this  does  not  mean  that  the  public  is  wrong,  through  a  fail- 
ure to  scale  down  taxes,  so  long  as  the  public  receives  proper  serv- 
ice for  the  money  set  apart  for  the  public  welfare.  I  do  not  mean 
to  intimate  that  our  present  taxes  should  not  be  scaled  down  in 
any  instance  from  what  they  are  under  present  conditions.  The 
truth  is  that  opportunities  abound  for  lessening  the  burdens  of  the 
people  through  the  practice  of  legitimate  economy.  There  is  such 
a  thing  as  false  economy,  and  there  is  legitimate  economy.  I 
plead  for  the  exercise  of  legitimate  economy,  and  I  hope  that  in 
the  discussions  of  this  Conference  that  particular  fact  will  be 
emphasized. 

But,  gentlemen,  I  am  not  here  this  morning  to  enter  at  length 
upon  the  discussion  of  the  great  subject  you  have  met  to  deliberate 
upon.  It  is  my  province  to  preside  while  the  gentlemen  who  have 
come  here  to  discuss  this  question  in  this  morning's  session  are 
heard.  I  note  from  your  program  that  the  first  speaker  is  Dr. 
Rawles,  of  Indiana  University.  He  has  given  a  great  deal  of  atten- 
tion to  the  proper  solution  of  public  questions.  He  is  a  political 
economist  of  recognized  ability.  He  is  rendering,  in  his  work,  a 
great  service  to  the  people  of  Indiana.  It  affords  me  great  pleasure 
to  present  to  you,  as  the  first  speaker  this  morning,  Dr.  Rawles. 

SOME  PRINCIPLES  OF  TAXATION 

DB.  WILLIAM  A.  RAWLES,  Professor  of  Political  Economy  in  Indiana  Uni- 
versity and  President  of  Indiana  State  Tax  Association 

Men  establish  governments  for  the  purpose  od:  attaining  a 
variety  of  objects  which  could  not  be  secured  by  individual  action. 
In  order  to  perform  their  functions  adequately  governments  require 
the  use  of  commodities  and  the  services  of  men.  In  'primitive 
times  these  services  and  goods  were  directly  contributed,  more  or 
less  voluntarily,  by  all  the  able-bodied  members  of  the  tribe.  In 
the  modern  state,  with  its  diversification  of  occupations  and  divi- 
sion of  labor,  it  is  more  economical  to  have  the  people  make  their 
contributions  in  the  form  of  a  money  payment  and  for  the  state 
to  hire  its  employees  and  buy  the  commodities  which  it  needs.  As 
in  olden  times  it  was  the  duty  of  the  citizen  to  serve  his  leader  with 
his  labor  and  goods,  so  today  it  is  his  duty  to  pay  taxes  for  the 
maintenance  of  the  state  because  it  is  a  part  of  him.  He  is  under 


TAXATION    IN    INDIANA  9 

the  same  obligation  to  support  the  state  as  he  is  to  provide  a  living 
for  himself  and  his  family.  "The  justification  of  taxation  is  polit- 
ical necessity." 

The  taxing  power  is  quite  as  fundamental  as  the  police  power, 
the  penal  power,  or  the  power  of  eminent  domain.  By  virtue  of 
this  taxing  power  the  state  may  compel  contributions  of  wealth 
from  persons  (private  or  corporate)  for  common  public  purposes. 
Such  contributions  are  denominated  taxes  and  constitute  the  main 
source  of  public  revenue. 

The  political  ideas  of  the  present,  however,  require  that  these 
compulsory  levies  upon  the  wealth  of  the  subjects  shall  be  made 
with  proper  regard  to  the  needs  of  the  governments,  to  the  eco- 
nomic effects  of  the  taxes,  and  with  due  consideration  of  the  prin- 
ciples of  justice.  Tax  officers  are  not  free  to  follow  their  own  in- 
clinations and  take  all  of  the  wealth  of  one  man,  half  of  the  wealth 
of  another,  and  exempt  others  entirely.  No  government  in  a  civ- 
ilized country  could  exist  for  a  day  if  it  permitted  its  officers  to 
exercise  such  arbitrary  power.  In  free  governments  tax  systems 
must  be  based  upon  law ;  and  the  law  must  have  guiding  principles 
and  not  be  the  mere  expression  of  the  judgment,  caprice,  or  preju- 
dice of  public  officials.  These  principles  must  be  such  as  com- 
mend themselves  favorably  to  the  large  mass  of  taxpayers,  I  wish 
to  call  your  attention  to  a  brief  consideration  of  some  of  the  prin- 
ciples which  underlie  an  equitable  system  of  taxation  and  make 
some  applications  of  them  to  the  conditions  in  our  own  State.  In 
doing  so  I  do  not  claim  originality  for  the  essential  ideas,  but  pre- 
sent them  rather  as  the  consensus  of  opinion  of  the  most  thoughtful 
students  of  taxation. 

I.     FISCAL  PRINCIPLES 

First  let  us  note  that  from  the  standpoint  of  the  treasury  or 
fiscus  there  are  two  main  principles.  The  first  of  these  is :  Taxes 
must  be  adequate.  They  must  produce  a  sufficient  revenue  to  meet 
the  expenditures  of  the  government.  What  the  amount  of  expendi- 
tures shall  be  depends  upon  the  prevailing  political  ideas  concern- 
ing the  proper  functions  of  the  state  or  of  the  local  government. 
If  the  people  believe  that  the  government  should  provide  service- 
able streets,  roads,  and  other  public  improvements;  that  it  should 
care  for  the  poor,  the  defective,  and  the  criminal;  that  it  should 
furnish  an  adequate  system  of  education  for  the  training  of  citi- 
zens and  leaders;  that  it  should  plan  parks  and  playgrounds  for 


10  INDIANA    UNIVERSITY 

the  recreation  of  children  and  adults;  that  it  should  supply  protec- 
tion against  disease,  fire,  and  burglary — in  a  word,  that  the  state 
should  function  in  a  large  way  for  the  common  weal  of  all  the 
people,  then  expenditures  will  be  relatively  large  and  the  revenues 
must  be  sufficient  to  meet  such  outlays.  This  demand  of  adequacy 
is  inexorable,  and  no  system  of  taxation,  however  just  and  econom- 
ical, will  be  a  success  which  does  not  produce  revenue  sufficient  to 
enable  the  state  to  do  those  things  which  the  people  consider 
necessary  and  desirable. 

The  second  fiscal  requirement  is  elasticity ;  that  is,  the  capacity 
of  a  tax  to  increase  or  decrease  the  amount  of  revenue  as  the  needs 
of  the  government  expand  or  contract.  It  is  wrong  to  take  from 
the  people  a  larger  share  of  their  wealth  than  is  necessary  for  the 
needs  of  government.  The  excess  can  be  more  economically  used 
if  left  in  the  hands  of  the  individual  owners.  Moreover,  a  surplus 
tempts  the  legislature  or  other  appropriating  body  to  indulge  in 
extravagance.  On  the  other  hand,  if  the  revenue  does  not  increase 
to  meet  expanding  needs  it  will  be  inadequate,  and  some  of  the 
proper  functions  will  have  to  be  discontinued  or  be  financed  by 
borrowing  money. 

The  general  property  tax  such  as  we  have  in  Indiana  conforms 
to  these  principles  fairly  well.  By  increasing  or  decreasing  the 
general  tax-rate  the  revenue  may  be  adjusted  to  meet  the  needs  of 
the  government.  It  should  be  noted,  however,  that  the  rate  should 
not  be  so  high  as  to  be  prohibitive  in  its  effect.  In  such  a  case  it 
would  destroy  the  productivity  of  the  tax  and  violate  the  economic 
principles  to  be  mentioned  later. 

II.     ADMINISTRATIVE  PRINCIPLES 

In  the  practical  administration  of  a  tax  law  there  are  four  im- 
portant steps:  (1)  the  determination  of  the  amount  of  taxes  which 
each  contributor  should  pay,  (2)  the  collection  of  that  sum  from 
each,  (3)  the  custody  of  the  funds,  and  (4)  the  accounting. 
From  the  standpoint  of  the  administration  an  ideal  tax  should  pos- 
sess the  following  characteristics:  (1)  ease  and  certainty  in  deter- 
in  in  ing  the  amount  of  the  tax  which  each  should  pay,  (2)  con- 
venience ;is  1o  lime  ;md  place  of  payment,  (8)  ease  and  economy 
of  collection,  (4)  safety  and  .economy  in  the  custody  of  the  funds, 
•  iccuracy  and  clearness  in  accounting. 

The  general  property  tax  of  Indiana  possesses  in  fair  degree  all 
of  these  characteristics  with  the  exception  of  the  first.  It  is  at"  this 


TAXATION    IN    INDIANA  11 

point  that  the  general  property  tax  breaks  down.  What  amount 
of  taxes  is  charged  against  the  individual  taxpayer  is  determined 
by  multiplying  the  assessed  value  of  his  property  by  the  rate.  The 
rate  is  imposed  by  the  legislative  branch  of  government  and  is  cer- 
tain. But  the  assessed  value  is  fixed  in  general  by  local  officers 
who  are  elected  for  short  terms,  placed  on  small  salary,  furnished 
with  inadequate  appliances,  and  unprotected  against  personal  and 
political  influences  which  may  be  brought  to  bear  upon  them. 
Therefore,  the  proportion  which  the  assessed  value  of  a  man's  prop- 
erty bears  to  its  true  value  is  very  uncertain.  And  the  injustice 
lies  in  the  fact  that  this  ratio  between  assessed  value  and  true 
value  may  be  different  for  every  taxpayer.  The  uncertainty  in  the 
mind  of  the  taxpayer  whether  or  not  he  is  paying  more  than  his 
fair  share  arouses  a  feeling  of  resentment  and  makes  it  difficult  to 
administer  the  tax  justly.  Failing,  then,  to  conform  to  this  admin- 
istrative principle,  the  general  property  tax  violates  practically 
every  other  canon  of  taxation. 

III.     ECONOMIC  PRINCIPLES 

Since  taxation  affects  the  production,  distribution,  and  consump- 
tion of  goods  it  presents  important  economic  aspects.  From  a  con- 
sideration of  the  general  effect  of  taxes  upon  economic  conditions 
three  principles  may  be  deduced : 

First,  a  tax  should  interfere  as  little  as  possible  with  the  proc- 
esses of  industry.  Its  effect  should  not  be  repressive  unless  it  is 
the  purpose  of  the  government  to  suppress  some  undesirable  busi- 
ness for  moral,  economic,  or  political  reasons.  For  example,  taxes 
on  liquors,  opium,  oleomargarine,  state-bank  notes,  and  imports  are 
sometimes  imposed  for  such  purposes.  Other  considerations  here 
outweigh  the  purely  financial  objects  of  taxation. 

Second,  taxes  ordinarily  should  be  paid  out  of  income.  Other- 
wise they  will  discourage  production  and  enervate  labor  and  ulti- 
mately dry  up  the  very  sources  of  revenue. 

Third,  the  shifting  and  incidence  of  taxes  should  be  easily 
ascertainable  in  order  that  the  real  tax-bearer  may  be  foreseen  and 
that  the  final  effect  of  the  taxes  on  production,  distribution,  and 
consumption  may  be  known.  The  economic  effects  of  the  general 
property  tax  in  Indiana  will  be  considered  in  detail  at  a  subsequent 
session  of  this  Conference.  I  shall  merely  point  out  here  that  a 
tax  which  absorbs  all,  or  a  large  part,  of  the  income  derived  from 
intangible  property  will  drive  loanable  funds  from  the  State  and 


12  INDIANA    UNIVERSITY 

impose  so  heavy  a  burden  upon  industry  that  production  will  be 
discouraged  and  industry  manacled. 

IV.     ETHICAL  PRINCIPLES 

Of  all  the  purposes,  functions,  or  tests  of  government  the  es- 
tablishment and  maintenance  of  justice  is  the  supreme  end.  In 
the  exercise  of  the  sovereign  power  of  taxation,  therefore,  the 
state  in  making  its  demands  upon  the  people  for  compulsory  con- 
tributions must  try  to  make  its  system  conform  to  the  highest 
standards  of  justice.  There  are  various  conceptions  of  the  ethical 
basis  of  taxation.  Only  two  of  these  need  hold  our  attention  at  this 
time — the  benefit  theory  and  the  ability  or  faculty  theory. 

The  benefit  theory  assumes  that  taxes  should  be  paid  in  return 
for,  and  in  proportion  to,  the  services  rendered  by  the  state  to 
the  various  taxpayers  of  the  state.  The  chief  benefits  of  govern- 
ment are-  usually  supposed  to  be  protection  to  life  and  property. 
But  in  the  words  of  John  Stuart  Mill :  ' '  The  ends  of  government 
are  as  comprehensive  as  those  of  the  social  union.  They  consist  of 
all  the  good,  and  of  all  of  the  immunity  from  evil,  which  the  exist- 
ence of  government  can  be  made  either  directly  or  indirectly  to 
bestow."  Most  of  these  services  or  benefits  are  immaterial  in 
character.  They  cannot  be  estimated  in  pounds  or  feet  or  gallons. 
They  do  not  lend  themselves  to  quantitative  measurement  by  any 
material  standards.  How  can  you  determine  the  quantity  and 
value  of  the  service  rendered  by  the  state  when  it  protects  a  man's 
life  or  guarantees  to  him  liberty?  The  essential  weakness  of  the 
benefit  theory  of  taxation  lies  in  the  fact  that  it  furnishes  no  accu- 
rate measure  of  the  amount  of  wealth  which  the  taxpayer  should 
contribute  in  exchange  for  the  benefits  which  he  enjoys.  The 
man  least  able  to  pay  may  be  the  one  who  would  suffer  most  if 
the  services  of  government  were  discontinued.  Neither  expendi- 
tures nor  property  nor  income  will  furnish  a  standard  by  which 
either  the  cost  or  the  value  of  benefits  can  be  gauged. 

Ability  or  faculty  offers  a  more  satisfactory  ethical  basis  of 
taxation.  This  theory  harmonizes  with  the  conception  of  the  state 
as  a  "thing  of  paramount  importance  to  the  development  of  the 
highest  social  relations  and  the  fullest  realization  of  the  ends  of 
social  and  individual  life."  It  assumes  that  every  taxpayer  should 
contribute  to  the  support  of  the  state  in  proportion  to  his  ability 
to  pay. 

What  is  the  index  or  measure  of  ability?  I  can  conceive  that 
in  a  primitive  society  size  or  physical  strength  of  individuals  might 


TAXATION    IN    INDIANA  13 

bo  a  fairly  just  measure  of  a  man's  ability  to  render  services  or 
payments  to  his  government.  And  in  such  a  stage  of  society  a  poll 
tax  laid  upon  all  the  able-bodied  men  would  meet  the  requirements 
of  justice.  But  in  the  modern  state  individuals  are  divided  into 
classes  each  having  its  distinct  economic  status,  and  individuality 
is  not  a  fair  test  of  ability.  Therefore,  a  uniform  poll  tax  would  be 
most  unjust.  Inasmuch  as  taxes  are  paid  out  of  wealth  (current 
or  accumulated),  property  in  some  stage  is  a  fairer  measure  of 
ability. 

One  of  the  obvious  measures  of  ability  is  expenditure  or  prop- 
erty in  the  process  of  consumption.  This  is  a  test  easily  applied 
by  using  direct  taxes  upon  consumption  and  indirect  taxes  upon 
business  and  industry.  It  is  true  that  such  taxes  would  fall  upon 
all.  But  they  would  not  be  proportioned  to  the  ability  of  each, 
for  expenditures  are  made  not  in  proportion  to  men's  abilities  but 
rather  in  proportion  to  their  needs.  The  man  of  small  income 
would  bear  a  burden  much  heavier  than  that  of  the  man  of  large 
income,  because  in  the  satisfaction  of  his  needs  he  consumes  a 
larger  proportion  of  his  income. 

Property  in  possession  would  be  a  fairer  measure  of  ability, 
although  not  the  best.  Property  is  of  two  kinds:  productive  or 
that  which  yields  an  income,  and  non-productive.  It  is  evident 
that  non-productive  property  is  not  a  good  test  of  ability.  How- 
ever, property  which  is  suitable  for  productive  purposes  but  which 
is  withheld  temporarily  from  use  does  have  a  potential  produc- 
tivity and  does  indicate  future  tax-paying  ability  which  may  prop- 
erly be  levied  upon  for  present  revenue.  Untilled  or  unoccupied 
land  would  be  an  illustration  of  this  exception.  But  unproductive 
property  which  is  being  consumed,  such  as  household  furniture, 
is  not  a  good  index  of  ability. 

Productive  property  in  the  economic  sense  is  a  satisfactory  test 
in  a  society  in  which  the  main  industry  is  agriculture.  But  in 
a  complex  industrial  society  it  falls  short  of  the  ideal  test  for 
the  following  reasons: 

1.  A  large  number  of  the  producers,  many  of  them  having 
large  incomes,  have  little  or  no  property.     But  they  have  evident 
taxpaying  faculty  which  would  not  be  reached  by  a  property  test. 

2.  Different  kinds  of  property  have  different  earning  capac- 
ities and  therefore  cannot  have  the  same  ability.     One  of  the  weak- 
nesses of  the  Indiana  law  lies  in  the  assumption  that  all  kinds  of 
property  can  bear  the  same  tax-rate  on  each  hundred  dollars' 
worth. 


14  INDIANA     TNIVKKSITY 

3.  There  is  CGJI fusion  where  there  is  a  divided  interest  in  prop- 
erty; that  is,  where  one  man  1ms  a  title  to  the  property  and  an- 
other has  a  mortgage  upon  it.  • 

4.  Finally,  the  difficulty  of  assessment  makes  the  property  tax 
an  unjust  one,  because  in  practice  taxpayers  do  not  contribute 
according  to  their  respective  abilities. 

The  best  test  of  ability  is  found  in  income  or  property  in  the 
process  of  acquisition.  By  income  is  meant  taxable  income  or  net 
income,  allowance  or  exemption  being  made  for  subsistence.  A 
full  discussion  of  this  test  would  require  consideration  of  such 
questions  as  these :  ( 1 )  Shoul  d  the  rate  of  taxation  be  the  same 
on  all  incomes  irrespective  of  their  sources  ?  (2)  Should  the  rate 
be  higher  upon  permanent  incomes  than  upon  temporary  or  uncer- 
tain incomes?  (3)  Should  the  rate  be  proportional  or  progres- 
sive? Time  will  not  permit  elaboration  of  these  points.  Though 
I  accept  the  principles  of  differentiation  of  income  and  progressiv- 
ity  in  rates  as  furnishing  a  nearer  approximation  to  justice,  I 
feel  that  we  are  at  present  more  concerned  with  the  practical  prob- 
lem of  devising  a  plan  whereby  we  can  secure  a  system  of  taxation 
which  will  give  us  a  proportional  tax  in  place  of  the  present  unjust 
regressive  tax. 

Assuming  now  that  ability  constitutes  the  best  ethical  basis  of 
taxation,  two  principles  may  be  deduced  therefrom.  The  first  of 
these  is  the  principle  of  equality.  Justice  requires  that  those 
having  equal  abilities  should  have  equal  tax-burdens.  The  second 
is  the  principle  of  universality.  Whoever  enjoys  ability  should 
contribute  to  the  support  of  the  state.  This  does  not  preclude  the 
exemption  of  those  persons  whose  incomes  do  not  provide  a  mini- 
mum subsistence.  If  taxes  are  exacted  from  them  society  will  have 
to  dispense  charity  to  them.  This  principle  does,  however,  pro- 
hibit the  exemption  of  any  privileged  class  that  has  tax-paying 
ability. 

I  have  sketched  here  briefly  the  principles  which  should  under- 
lie a  system  of  taxation.  They  seem  to  me  to  have  not  merely  an 
academic  interest  but  a  practical  application,  for  the  present  sys- 
tem in  Indiana  violates  them  in  so  many  respects.  And  no  plan 
will  offer  any  substantial  relief  to  the  people  which  is  not  based 
upon  these  fundamentals.  Theoretically  the  income  tax  conforms 
most  nearly  to  these  principles.  But  the  earlier  experiences  of 
the  American  States  disclosed  such  difficulties  in  its  administration 
lli at.  in  practice  it  proved  to  be  both  inadequate  and  unjust.  The 
•  -xperiment  of  Wisconsin  with  the  income  tax  is  being  watched 


TAXATION    IN    INDIANA  15 

with  interest  by  all  students  of  taxation.  However,  some  of  the 
merits  of  the  income  tax  might  be  secured  indirectly  by  a  modifi- 
cation of  the  general  property  tax.  A  classification  of  property 
with  some  regard  to  its  productivity  and  the  imposition  of  different 
rates  upon  different  classes  would  make  it  conform  more  nearly 
to  the  canons  of  justice,  and  thereby  would  make  it  easier  to  admin- 
ister and  would  increase  its  yield  of  revenue.  This  might  be  com- 
bined with  a  gross  receipts  tax  on  corporations.  The  tax  on  per- 
sonal property  in  the  form  of  household  goods  should  be  entirely 
abolished  and  in  its  place  might  be  substituted  a  habitation  tax. 
This  is  a  tax  upon  the  rental  value  of  residences  paid  by  the  occu- 
piers thereof.  Small  residences  should  be  exempted  and  the  rate 
should  increase  as  rentals  increase  in  amount.  The  sum  paid  for 
rent  is  a  rough  index  of  a  man's  income  and  of  his  ability  to  pay. 
Lack  of  time  forbids  a  proper  discussion  of  these  proposals.  In 
fact,  each  of  them  is  worthy  of  a  separate  paper  and  informal  dis- 
cussion. The  most  feasible  change  in  Indiana  at  the  present  time 
seems  to  be  a  classification  of  property. 

The  average  taxpayer  in  Indiana  is  dissatisfied  because  of  Ilic 
amount  of  his  taxes.  His  dissatisfaction  should  extend  further 
than  that  and  reach  the  system.  The  people  must  think  this  thing 
through  and  see  that  the  present  system  is  responsible  for  the 
amount  of  the  burden  and  the  inequality.  For  the  purpose  of  stim- 
ulating interest  in  this  matter  the  first  conference  on  taxation  was 
called  in  February  of  this  year  and  this  Tax  Association  was  formed. 
Its  purpose  is  to  investigate  the  actual  conditions,  to  discuss  these 
in  a  frank  and  friendly  way,  and  to  disseminate  information  among 
the  people.  We  believe  that  this  Association  can  do  much  good  in 
the  State,  and  we  ask  your  hearty  support  and  co-operation. 

At  the  first  conference  we  invited  distinguished  authorities  from 
outside  the  State  to  tell  us  of  the  experiences  of  other  States.  At 
this  Conference,  with  one  or  two  exceptions,  our  speakers  come  from 
Indiana.  It  is  a,  irathe'ring  of  practical  men  representing  the  vari- 
ous occupations  and  professions  for  deliberation  upon  one  of  the 
most  fundamental  tasks  of  government. 


II.    PUBLIC  EXPENDITURES 


INCREASING  DEMAND  ON  THE  STATE  AND  THE  STATE 

REVENUE 

HON.  WILLIAM  II.  O'BRIEN,  Former  Auditor  of  State 

There  is  no  mystery  about  the  increased  demand  on  the  State 
and  the  State  revenue.  For  twenty-five  years  the  cost  of  govern- 
ment in  the  town,  township,  city,  county,  State,  and  nation  has  been 
steadily  increasing.  Part  of  the  increase  is  due  to  the  growth  of 
population,  but  the  greater  part  of  the  increase  is  due  to  an  increase 
in  the  functions  of  government,  and  to<  many  things  along  the  so- 
called  progressive  lines  of  government  that  the  people  apparently 
have  persistently  demanded. 

The  State  educational  institutions  have  demanded  more  money 
to  enable  them  to  rank  with  those  of  other  States  in  the  problems 
they  may  undertake,  and  to  plan  and  execute  great  things  for  the 
ambitious  boys  and  girls  of  Indiana. 

The  benevolent  and  correctional  institutions  are  increasing  in 
number  and  population,  and  demand  more  money  constantly.  As 
civilization  advances,  governments  become  more  humane,  and  better 
care  is  given  the  unfortunates  and  dependents,  and  we  must  give 
more  to  the  State  in  the  way  of  taxes  for  the  purpose  of  adminis- 
tering this  function  of  humane  government. 

Eighty  per  cent  of  all  the  money  collected  by  the  State  in  the 
way  of  direct  taxes  goes  to  education  and  benevolence.  While  these 
two  great  necessary  functions  of  government  are  the  principal 
causes  for  increased  State  taxation  and  the  depletion  of  State  reve- 
nue, they  are  only  two  of  many  things  that  feed  on  taxes.  They 
all  cost  money,  and  almost  every  one  has  been  added  to  the'  State 
government  by  the  apparent  demand  of  the  people. 

Unfortunately  the  taxpayer  is  not  always  represented  among 
the  influences  actively  at  work  around  the  halls  of  legislation  in 
asking  for  more  government.  One  body  of  men  may  not  be  inter- 
ested in  this  thing  or  that  thing,  but  they  are  interested  in  some 
thing.  Another  body  of  men  are  interested  in  some  other  thing. 
Then  all  of  these  somebodies  claiming  to  speak  for  everybody  get 

(16) 


TAXATION    IN    INDIANA  17 

together  and  organize  a  movement  to  reform  something  or  regulate 
somebody,  and  every  one  of  these  so-called  beneficial  measures  to 
lighten  the  burdens  of  the  people  has  a  little  movement  of  its  own 
— always  toward  the  cash  register. 

The  friends  of  these  movements  for  more  government  are 
always  busy  with  members  of  the  legislature,  but  the  taxpayer  at- 
tending to  his  own  business  does  not  get  a  look-in  until  he  sees  his 
tax  receipt  for  an  increased  contribution  to  the  public  treasury. 
All  of  these  somebodies  demanding  a  lot  of  somethings  keep  ham- 
mering away  at  the  legislature  in  the  name  of  the  people  at  home 
until  an  artificial  sentiment  impresses  the  law-maker  that  another 
commission,  or  board,  or  bureau,  is  needed,  and  the  inarch  toward 
the  State  money-drawer  is  begun,  and  each  year  the  march  grows 
stronger  and  stronger.  New  offices  are  thus  created,  and  they  cling 
to  the  pay-roll  after  they  have  ceased  to  be  useful,  and  become  liv- 
ing monuments  to  the  demands  of  mistaken  public  sentiment.  The 
increasing  demands  on  the  State  revenue  would  be  materially 
relieved  if  the  pruning-knife  was  applied  to  useless  departments  of 
government,  and  the  scrap-pile  fed  with  bad  laws  of  license  and 
regulation. 

When  the  public  is  not  asking.,  for  and  does  not  want  many 
functions  of  government,  the  financing  of  government  is  a  simple 
matter  and  does  not  arouse  much  concern  or  attention.  As  popu- 
lation grows,  and  civilization  advances,  taxes  increase.  The  people 
everywhere,  in  the  State  and  nation,  seem  to  be  demanding  that  the 
State  shall  undertake  to  do  everything^ that  is  good  for  the  people, 
without  counting  the  cost.  These  insistent  demands  place  upon  the 
government  many  of  the  individual  obligations  and  duties  of  society 
and  breed  taxes. 

We  have  five  hospitals  for  the  care  of  the  insane,  all  filled  to 
their  capacity.  We  have  schools  for  the  blind,  the  deaf,  the  dumb, 
and  feeble-minded;  we  have  villages  for  epileptics  and  tubercular 
people ;  we  have  homes  for  the  old  soldiers  and  orphans ;  we  have 
schools  for  boys  and  girls  who  have  strayed  away  from  right  living ; 
we  have  reformatories  for  young  men  and  women ;  we  have  a  Board 
of  Public  Accounts  to  supervise  all  public  officials ;  we  have  a  Health 
Bureau  to  prevent  disease;  we  have  a  Public  Service  Commission 
to  regulate  the  affairs  between  the  people  and  the  public  service  cor- 
porations; we  have  a  Pure  Food  Bureau  to  protect  and  safeguard 
the  people  from  unsanitary  conditions,  short  weights  and  measures ; 
we  have  a  Legislative  Reference  Bureau  to  keep  us  informed  as  to 

2—2902 


18  INDIANA     I    \  l\  KKSITY 

what  legislatures  in  other  States  are  doing  for  the  people ;  we  look 
after  the  victims  of  mad  dogs;  we  have  examining  boards  for 
nurses,  doctors,  pharmacists,  cmbalmers,  optometrists;  we  have  a 
lion  I'd  of  Forestry  and  an  Entomologist;  we  have  bureaus  to  in- 
spect fire  escapes,  boilers,  oils,  gasolines;  in  fact,  we  have  commis- 
sions, boards,  and  bureaus  for  almost  everything  under  the  sun, 
and  if  anything  has  been  overlooked,  you  will  find  advocates  for 
the  supervision  and  inspection  of  the  slighted  portion  of  the  popu- 
lation about  the  legislature  next  month.  All  of  these  things  cost 
money  taken  from  the  people  directly  or  indirectly. 

Indiana  does  not  stand  alone  in  the  increased  cost  of  govern- 
ment. Tables  prepared  by  the  Wisconsin  Tax  Commission  show 
that  in  the  twenty  States  of  Maine,  New  Hampshire,  Vermont,  Mas- 
sachusetts, Rhode  Island,  Connecticut,  New  York,  Pennsylvania, 
Virginia,  Michigan,  Iowa,  Minnesota,  Utah,  Texas,  North  Dakota, 
Kansas,  and  California,  the  expenditures  increased  year  by  year 
from  .$122,000,000  in  1903  to  $250,000,000  in  1912.  Add  to  this 
the  activities  of  the  smaller  political  subdivisions  in  construction 
of  good  roads,  good  bridges,  public  buildings,  good  schools,  sewers, 
water-works,  public  libraries,  and  all  the  other  things,  good  and 
bad,  that  the  people  want  done,  we  have  the  application  of  the  law 
of  increasing  public  expenditures.  It  is  gratifying  to  know  that 
the  percentage  of  increase  in  Indiana  is  less  than  in  a  majority  of 
the  States  named. 

When  the  first  billion-dollar  appropriation  bill  passed  the  na- 
tional Congress,  the  press  of  the  country  was  aroused,  but  Tom 
Reed,  then  Speaker  of  the  House,  defended  Congress,  and  pro- 
claimed the  United  States  a  billion-dollar  country.  The  people 
seemed  to  think  so  and  re-elected  the  Reed  Congress.  Information 
from  the  national  capital  warns  the  country  that  the  next  national 
appropriation  bill  will  reach  the  sum  of  $1,150,000,000— all  of 
which  goes  to  show  that  the  increasing  demands  on  State  revenue  in 
Indiana  have  not  kept  pace  with  the  demand  for  more  government 
in  the  nation. 

The  remedy  for  checking  the  increasing  demands  on  the  State 
revenue  lies  first  in  abolishing  all  useless  commissions  and  depart- 
ments ;  second,  in  consolidating  and  getting  rid  of  duplication ;  and 
lastly,  in  applying  the  old  Jeffersoiiian  philosophy,  "The  govern- 
ment that  governs  the  least  governs  the  best. ' ' 


TAXATION   TN    INDIANA  19 

MUNICIPAL  FINANCIAL  PRESSURE 
JOHN  C.  WILLIAMS,  Ex-Controller  of  the  City  of  Anderson 

I  am  by  no  means  sure  that  what  I  may  have  to  say  in  the  time 
allotted  me  in  your  program  will  have  a  direct  bearing  upon  the 
general  proposition  of  taxation,  which  I  understand  to  be  the  chief 
theme  of  this  Conference.  But  in  a  general  way  there  may  be 
found  numerous  points  of  contact,  since  you  are  to  consider  the  gen- 
eral question  of  taxation  and  I  have  been  asked  to  present  the  mat- 
ter of  Municipal  Financial  Pressure.  In  other  words,  I  am  present- 
ing a  few  causes  that  are  compelling  you  to  worry  and  fret  over 
tax-duplicates,  equalization  of  assessments,  and  tax-rates. 

I  have  held  for  many  years  the  opinion  that  government — such, 
as  it  is — costs  too  much  money.  This  is  particularly  true  of  city 
government.  The  reasons  for  this  are  quite  obvious. 

In  the  first  place,  the  present  federal  plan  of  governing  cities 
is  not  scientific,  therefore  it  is  inefficient,  and  being  inefficient  there 
must  be  a  waste  of  money — and  wasted  public  funds  mean  high  tax- 
ation. Until  we  are  wise  enough  to  abandon  the  present  system  of 
permitting  city  government  to  be  the  prize  of  biennial  or  quadren- 
nial political  tugs  of  war,  there  is  nothing  else  to  do  but  submit  to 
inefficiency  and  rising  taxes.  The  present  system  of  governing 
cities  is  in  my  opinion  the  cause  of  rising  taxation  and  should  by 
all  means  be  changed. 

No  one  is  more  keenly  alive  to  the  defects  of  the  present  system 
than  the  business  man  and  taxpayer.  Year  after  year  he  observes 
how  city  government  is  fought  over  by  rival  political  -parties  with 
their  cliques  and  rings — not  for  the  praiseworthy  object  of  giving 
better  public  service,  but  for  the  purpose  of  building  and  strength- 
ening political  machines  or  for  some  other  purpose  equally  repre- 
hensible. 

This  fact  in  my  opinion  is  one  strong  reason  why  men  of  wealth 
resort  to  all  sorts  of  schemes  to  evade  taxation.  Government  of 
cities  is  to  them  but  part  of  a  political  game  which  they  are  com- 
pelled to  finance.  They  note  extravagance  and  inefficiency  in  pub- 
lic service,  the  multiplication  of  needless  officials,  salary-grabbing, 
and  in  many  instances  positive  acts  of  corruption.  So  they  evade 
taxation  either  by  sending  their  money  outside  the  State  for  in- 
vestment or  by  investing  in  non-taxable  securities,  and  at  times 
perhaps  they  deliberately  sequester  their  property,  justifying  their 
own  wrongdoing  because  of  the  crime  of  misgovernment. 


20  INDIANA 

At  the  risk  of  being  impeached  for  threshing  over  old  s1r;i\\, 
I  want  to  emphasize  that  the  one  great  cause  of  financial  pressure 
in  cities  is  the  vicious  influence  of  boss  and  machine  politics  in  city 
government.  (Applause.)  In  most  cities  this  influence  perme- 
ates every  department  of  public  service,  it  results  in  overmanning 
the  police,  street,  and  fire  departments,  it  is  often  noticed  in  the 
increase  of  salaries  of  political  favorites  and  in  the  creation  of  sine- 
cures for  ward-workers,  causing  derangement  of  fiscal  plans,  and 
invariably  contributing  to  inefficiency  and  general  demoralization  of 
the  public  service.  Machine  politics  and  economy  and  efficiency  of 
city  administration  are  incompatible.  The  fiscal  officer  of  a  city 
may  plan  his  budget,  but  the  political  boss  comes  along  with  a  ret- 
inue of  political  favorites  demanding  place,  financial  plans  are 
knocked  into  a  cocked-hat,  and  the  dreams  of  a  lower  tax-rate  are 
supplanted  by  the  actualities  of  a  deficit  and  the  impending  in- 
crease of  the  tax-rate. 

The  law  relating  to  cities  of  the  first,  second,  and  third  class 
apparently  gives  the  controller  ample  power  to  control  the  fiscal 
affairs  of  the  city,  but  as  a  matter  of  fact  this  is  not  true  for  the 
reason  that  he  holds  office  by  appointment  instead  of  election.  The 
controller  is  appointed  by  the  mayor.  If  the  mayor  is  all  right, 
all  well  and  good ;  but  if  he  has  political  debts  to  pay  and  personal 
friends  to  reward  at  public  expense  then  the  statutory  powers  of 
the  controller  are  nullified  and  he  becomes  the  mere  tool  of  the 
mayor  and  the  political  machine.  He  is  thus  unable  to  serve  the 
public  in  the  best  way.  Party  interests  too  often  demand  place 
for  party  friends  in  the  public  service  of  the  city  whether  the  city 
needs  men  or  not.  In  other  words,  the  interests  of  the  public  are 
subordinated  to  the  interests  of  the  party  machine.  When  this 
condition  exists,  as  it  does  in  many  cities  and  towns,  economy  in 
administration  is  impossible  and  the  demand  for  more  money  and 
higher  taxes  are  inevitable. 

I  know  of  no  better  way  to  check  this  demand  for  more  money 
in  cities  of  the  class  I  have  mentioned  than  to  make  the  office  of 
controller  elective  instead  of  appointive,  and  then  see  to  it  that 
men  of  sand  and  sense  are  selected  for  this  position.  I  am  con- 
fident if  my  friend  Dunn  held  his  commission  from  the  people  of 
Indianapolis  instead  of  the  mayor  he  would  experience  but  little 
trouble  in  keeping  the  expenses  of  the  city  within  its  income,  and 
that  temporary  loans  for  the  purpose  of  paying  the  genrr;il  ex- 
penses of  the  city  would  not  be  necessary.  The  city 


TAXATION    IN    INDIANA  21 

should  be  controller  in  fact  and  not  in  name  merely,  and  he  must 
be  independent  of  any  man  or  set  of  men  connected  with  the  city 
government,  and  responsible  only  to  the  people  if  the  fiscal  affairs 
of  cities  and  towns  are  to  be  conducted  as  they  should  be.  The 
controller  should  be  the  fiscal  czar,  the  city's  business  manager. 
Dayton,  Ohio,  is  showing  us  possibilities  along  this  line.  And  it 
seems  to  me  that  this  body  could  do  nothing  more  practical  along 
the  line  of  relieving  the  financial  pressure  of  cities  than  to  ask  the 
incoming  legislature  to  amend  the  present  statute  so  as  to  provide 
for  the  election  of  city  controller  by  the  people.  Either  this  should 
be  done  or  else  the  present  federal  plan  of  governing  cities  should 
be  abolished  and  the  commission  form  of  government  substituted. 
(Applause.) 

Surely  it  must  be  apparent  to  all  students  of  municipal  govern- 
ment that  sound  business  methods  must  be  adopted  in  the  govern- 
ment of  cities  rather  than  party  machine  methods  if  economy  and 
efficiency  are  to  prevail  and  taxes  are  toi  be  lowered. 

Somehow  it  seems  that  our  conservatism  holds  us  so  closely  to 
the  ancient  form  of  city  government  that  nothing  short  of  a  cat- 
aclysm— a  sense  of  absolute  despair — will  ever  induce  us  to  make 
a  change.  It  required  that  tremendous  tidal  wave  to  sweep  Gal- 
veston  away  from  her  archaic  and  inefficient  form  of  city  govern- 
ment, while  nothing  short  of  a  devastating  flood  showed  Dayton, 
Ohio,  the  folly  of  government  by  political  rings  and  corrupt  utility 
cliques.  And  you  in  a  sense  are  promoting  this  Conference  because 
of  the  rising  tide  of  taxation  which  is  driving  millions  of  capital 
from  the  State,  and  is  imposing  crushing  burdens  upon  that  which 
remains. 

But  the  financial  pressure  that  comes  from  the  operation  of 
the  political  machine  is  by  no  means  the  only  one  which  is  brought 
to  bear  upon  municipalities. 

There  is  growing  up  in  all  our  cities  a  demand  for  the  expendi- 
ture of  money  which  is  the  result  of  the  growing  spirit  of  what  you 
might  well  call  collectivism.  This  is  the  community  spirit  which 
is  constantly  demanding  that  city  government  assume  functions 
heretofore  performed  by  private  individuals  or  corporations.  Civic 
organizations  are  very  insistent  in  their  demands  that  this  and  that 
thing  be  done  to  add  to  the  beauty  and  adornment  of  the  communi- 
ty. They  demand  the  planting  of  trees  and  flowers,  the  mainte- 
nance of  municipal  hot-houses,  the  acquisition  of  land  for  the  de- 
velopment of  parks  and  boulevards,  the  organization  of  depart- 


22  INDIANA    UNIVEKSITY 

merits  for  the  inspection  of  residences  and  tenement  houses  to  the 
end  that  tuberculosis  may  be  checked.  Along  this  line  come  two 
most  insistent  demands:  one  is  for  the  thorough  organization  and 
the  ample  financing  of  the  health  department,  so  •  that  epidemics 
of  contagious  and  infectious  diseases  such  as  typhoid  may  be  pre- 
vented, and  the  other  is  for  the  medical  inspection  of  school  chil- 
dren, and  the  enforced  treatment  of  defective  children  at  public 
expense. 

Sanitary  science. has  shown  us  that  most  diseases  are  preventa- 
ble and  that  money  spent  in  producing  wholesome  sanitary  condi- 
tions, the  inspection  of  food  products,  milk,  et  cetera,  is  the  best 
way  public  funds  may  be  employed,  for  the  reason  that  health  is 
the  best  asset  any  community  can  possibly  have.  All  sickness  is 
economic  waste  of  the  worst  form  and  losses  from  this  cause  can 
never  be  recovered.  The  department  of  health  in  the  well  gov- 
erned city  of  the  present  takes  precedence  even  of  the  fire  and  police 
departments.  Science  has  revolutionized  public  opinion  upon  the 
question  of  preventable  disease,  and  now  it  is  generally  recognized 
that  the  chief  function  of  city  government  is  to  keep  the  municipali- 
ty in  a  sanitary  condition. 

Again  this  spirit  of  collectivism  is  demanding  the  establishment 
of  municipal  coal  and  wood  yards,  ice  and  cold  storage  plants. 
And  here  I  stop  long  enough  to  introduce  you  to  the  most  important 
functionary  of  the  government  of  the  future  and  the  near  future 
at  that,  the  city  Food  Commissioner,  the  man  who  will  act  as  pur- 
chasing agent  of  food  supplies  for  a  whole  city — and  why  not? 
"With  ample  cold  storage  facilities  at  his  command  to  guard  against 
loss,  why  should  not  the  city  protect  its  people  from  the  extortions 
of  the  commission  merchant,  and  the  criminal  manipulations  of 
supply  ?  Producers  all  over  the  country  would  much  prefer  to  deal 
with  the  food  commissioners  of  cities  rather  than  with  commission 
men  for  reasons  best  known  to  themselves.  This  plan  would  remove 
the  artificial  obstructions  which  the  organized  commission  men  of  the 
country  have  placed  in  the  way  of  the  natural  movement  of  food 
supplies.  Last  fall  here  in  Indianapolis  you  paid  six  cents  a  pound 
for  cabbage  while  thousands  of  tons  were  rotting  in  the  fields  of 
Texas,  and  you  were  told  that  cabbage  was  scarce.  About  the  same 
time  one  of  your  commission  merchants  bought  the  entire  crop  of 
a  ten-acre  pear  orchard  just  outside  the  city  limits.  To  place  on 
the  local  market?  No,  to  keep  that  crop  from  getting  on  the  local 
market.  He  fed  it  to  the  hogs.  And  that  same  summer  agents  of 


TAXATION    IN    INDIANA  23 

these  same  philanthropic  commission  men  went  over  the  country 
buying  potato  crops  only  to  let  them  rot  in  the  ground. 

New  York,  Cleveland,  and  Chicago  are  attempting  to  solve  the 
food  supply  problem  and  if  possible  create  better  conditions 
through  municipal  aid.  The  former  experimented  last  year  with  a 
municipal  fish  and  vegetable  market  while  the  latter  attempted  the 
municipal  store.  Cleveland  now  operates  a  municipal  cold  stor- 
age plant  for  the  purpose  of  enabling  citizens  to  purchase  perish- 
able food  products  in  season  and  at  low  price,  and  to  store  them 
at  a  small  cost. 

I  have  elaborated  on  this  phase  of  demand  for  municipal  serv- 
ice merely  to  call  attention  to  the  rapid  advance  of  the  spirit  of 
collectivism  in  cities' all  over  the  country  and  to  remind  you  that 
it  is  finding  expression  in  the  demand  upon  city  government  to  do 
more  than  give  the  people  good  streets,  water,  fire  and  police  pro- 
tection. They  want  protection  from  the  powers  of  pillage  which 
prey  upon  them  through  the  seizure  and  arbitrary  control  of  food 
supplies.  If  the  government  of  the  United  States  deems  it  proper 
to  check  the  unfair  exactions  of  transportation  companies,  if  it  en- 
ters the  field  of  commerce  and  interdicts  combinations  in  restraint 
of  trade,  if  England,  Germany,  and  France  see  fit  to  throttle  com- 
mercial greed  which  was  ready  to  profit  by  the  scarcity  of  food  due 
to  the  stress  of  war,  do  you  wonder  that  men  living  in  cities  are  ap- 
pealing to  municipal  government  to  help  them  in  the  struggle  to 
live? 

Government  has  a  broader  meaning  than  we  were  wont  to  grant 
a  few  years  ago.  Now  it  is  not  merely  the  means  of  securing  per- 
sonal and  property  rights,  the  observance  of  law  and  order.  It 
has  a  wider  social  meaning.  It  must  be  the  instrument  of  broader 
service  and  no  government  is  worthy  of  the  name  that  cannot  be 
made  to  contribute  to  this  end. 

So  perhaps  you  may  agree  with  me  that  the  growing  municipal 
financial  pressure  is  due  to  the  rising  spirit  of  collectivism.  If 
you  ask  me  how  cities  are  to  meet  this  increasing  demand,  I  will 
answer  by  quoting  an  old  proverb,  "The  hair  of  a  dog  is  cure  for 
his  bite."  In  other  words,  I  would  meet  this  demand  for  more 
money,  for  a  larger  and  more  varied  public  service,  by  more  collec- 
tivism, by  the  condemnation  and  seizure  of  all  public  service  cor- 
porations and  their  operation  as  municipal  properties'  for  the  bene- 
fit of  the  community. 

Men  refuse  to  be  frightened  now  when  we  refer  to  such  plans 


24  INDIANA    UNIVERSITY 

of  collectivism  or  socialism.  They  are  beginning  to  see  that  such 
plans  are  rationalism  applied  to  local  government.  A  few  days 
ago  at  the  meeting  of  mayors  in  Philadelphia  the  theme  most  ex- 
haustively discussed  was  the  municipal  ownership  and  operation 
of  public  utilities.  And  to  the  surprise  of  many  there  was  but 
little  if  any  opposition. 

Mayor  Baker  of  Cleveland  gave  his  own  city's  experience  in 
building  and  operating  an  electric  light  and  power  plant.  Two 
years  ago  the  city  authorized  a  $2,000,000  bond  issue  for  the  pur- 
pose of  acquiring  a  light  plant.  The  result  has  been  remarkable. 
Not  only  has  the  city  of  Cleveland  found  it  possible  to  give  to  the 
people  a  three-cent  current  but  the  indications  are  that  the  ensuing 
year  will  show  a  profit  of  $500,000  on  the  investment,  with  possi- 
bilities of  much  larger  earnings  as  the  lines  of  the  system  are  ex- 
tended over  the  city.  Cleveland  will  soon  be  in  a  fair  way  to  take 
the  people 's  money  which  heretofore  has  been  going  out  of  the  city 
to  nonresident  stockholders  of  the  privately  owned  public  service 
utilities  and  to  use  that  money  to  buy  another  form  of  service  for 
the  city,  thus  relieving  property  of  some  of  the  burdens  that  are 
now  placed  upon  it  by  taxation. 

Assuming  for  the  purposes  of  this  discussion  that  the  city  of 
Indianapolis  owned  the  public  service  corporations  of  the  communi- 
ty and  that  the  net  income  from  them  amounted  to  $3,000,000,  how 
much  of  a  tax-rate  would  you  have  to  impose  upon  property  to 
make  up  the  difference  between  that  sum  and  the  amount  you  now 
spend  annually  for  city  puproses?  And  what  would  be  the  effect 
upon  property  values  in  Indianapolis  under  such  a  low  rate  of  taxa- 
tion ?  Furthermore,  what  would  be  the  economic  effect  upon  your 
community  of  keeping  at  home  $3,000,000  annually  instead  of  send- 
ing that  amount  abroad? 

I  know  something  of  the  practical  side  of  municipal  ownership, 
its  possibilities,  what  it  means  in  the  matter  of  low  cost  of  service 
to  the  people,  and  its  effect  upon  taxation,  when  properly  applied. 
And  since  I  have  had  these  four  years  of  experience  I  have  ceased 
to  take  much  interest  in  tax-rates  except  as  they  have  approached 
the  vanishing  point. 

For  a  number  of  years  Anderson  has  owned  her  water  and  elec- 
tric light  plants.  At  first  the  people  were  skeptical,  if  not  openly 
hostile  to  municipal  ownership.  The  properties  grew  slowly,  but 
gradually  the  people  were  won  to  more  cordial  support  of  the 
policy.  Improvements  in  electrical  appliances  and  water  filtration 


TAXATION  IN   INDIANA  25 

came  along,  and  as  fast  as  possible  these  improvements  were 
adopted.  Men  of  broad  views  began  to  appear  in  the  city  council 
and  soon  the  municipal  ownership  of  public  utilities  began  to  be 
accepted  as  the  proper  thing.  Four  years  ago  the  city  of  Ander- 
son was  $288,000  in  debt  and  the  tax  rate  was  1.08  dollars.  The 
administration  which  came  in  at  that  time  conceived  the  plan  that 
it  was  possible  to  make  the  city  utilities  carry  the  big  end  of  the 
city's  general  expense.  They  planned  well.  The  first  step  was 
to  pay  off  the  utility  debt  and  then  build  up  the  properties  to  the 
point  where  they  could  be  absolutely  depended  upon  for  service. 
The  electric  plant's  debt  of  $65,000  was  paid  off  and  $125,000  in 
improvements  were  added,  and  the  capacity  of  the  plant  more  than 
doubled.  The  water  plant  was  increased  50  per  cent  in  capacity, 
$60,000  added  in  betterments,  and  a  debt  of  $87,000  paid.  Both 
of  these  properties  were  given  air-tight  business  management;  the 
factories  were  encouraged  to  take  power  and  light  service;  and  a 
vigorous  campaign  was  begun  to  place  both  water  and  light  service 
in  the  homes  of  the  people.  The  result  exceeded  the  most  san- 
guine expectation.  In  four  years  the  increase  of  revenues  from  both 
properties  was  almost  doubled,  and  in  December,  1913,  the  city  of 
Anderson  did  not  owe  a  dollar  of  interest-bearing  debt  the  pay- 
ment of  which  was  not  provided  for  by  a  special  bond  redemption 
fund,  and  the  tax-rate  was  reduced  from  1.08  dollars  to  65  cents. 
(Applause.)  Nor  was  this  accomplished  by  holding  the  people  up 
for  high-priced  water,  light,  and  power  service.  Within  this  period 
there  was  an  actual  reduction  of  30  per  cent  in  the  cost  of  light 
service.  And  it  is  now  true  that  Anderson  has  the  lowest  average 
rate  of  any  city  in  the  country. 

The  net  earnings  of  these  two  properties  after  setting  aside  a 
generous  amount  for  depreciation  will  aggregate  more  than  $90,000. 
This  amount,  under  the  law  enacted  in  1913,  largely  through  the 
personal  efforts  of  the  Honorable  Frank  P.  Foster,  who  was  then 
Mayor  of  Anderson,  is  now  available  for  general  purposes,  and  is 
practically  equivalent  to  the  returns  from  a  tax  levy  of  90  cents  on 
the  face  of  the  present  tax-duplicate. 

Nor  is  this  all,  for  it  should  be  borne  in  mind  that  these  proper- 
ties are  not  more  than  half  developed  in  so  far  as  the  possible 
volume  of  business  is  concerned.  So  when  the  time  arrives  that  the 
taxpayer  and  the  consumer  are  one  and  the  same,  Anderson  will 
have  achieved  the  distinction  of  being  a  taxless  city,  a  place  where 
the  expense  of  government  is  borne  by  the  profits  from  her  utilities, 


26  INDIANA    UNIVERSITY 

and  at  that  under  rates  that  are  lower  than  prevail  elsewhere  for 
similar  service. 

Anderson  is  ready  to  meet  the  demand  for  more  service  arising 
from  the  collectivist  spirit  among  her  people  and  she  will  meet  this 
demand  by  buying  this  form  of  service  with  the  profits  of  the  pub- 
lic service  plants  which  she  owns  and  operates,  always  conscious  of 
the  fact  that  should  any  emergency  arise  she  holds  in  reserve  a 
tax-duplicate  of  $11,000,000  which  may  be  drawn  upon  at  any  time, 
through  the  usual  methods  of  taxation. 

I  know  of  but  two  ways  by  which  the  rising  tendency  of  prop- 
erty taxation  in  cities  is  to  be  checked.  One  is  through  the  most 
rigid  business  management  of  our  cities  whereby  the  money  of  the 
people  may  be  conserved  and  not  wasted  and  the  other  is  through 
the  seizure  and  operation  of  all  public  properties  and  the  employ- 
ment of  the  profits  derived  therefrom  in  lieu  of  money  taken  from 
properly  by  taxation.  So  that  under  this  view,  proper  organiza- 
tion and  administration  of  cities  take  precedence  of  all  matters 
relating  to  taxation  and  the  proper  sohition  of  the  first  eliminates 
the  latter  as  a  problem  of  city  government, 

PROBLEMS  OF  COUNTY  FINANCE 
LEWIS  S.  BOWMAN,  Auditor  of  Wayne  County 

The  problems  of  county  finance  are  similar  to  the  problems  of 
State  finance  or  municipal  and  township  finance  in  that  each  unit 
derives  the  principal  part  of  its  revenue  from  taxation,  which  is 
based  on  the  same  assessments  of  property,  and  is  in  a  general  way 
affected  by  similar  conditions. 

The  chief  problems  of  county  finance  present  themselves  in. the 
assessment  of  property,  in  levying  the  tax-rate,  and  in  the  admin- 
istration of  county  business. 

The  assessment  of  property,  as  made  by  the  present  methods, 
presents  the  problem  of  unequal  taxation  caused  by  undervalua- 
tions, overvaluations,  and  the  sequestration  of  property.  Under- 
valuation is  the  general  rule  and  overvaluation  the  rare  exception. 
Undervaluation  is  the  result  of  each  county  diminishing  its  values 
as  a  matter  of  self-protection  as  against  other  counties  in  the  pay- 
ment of  State  taxes;  of  each  township  in  a  county  diminishing  its 
values  as  a  matter  of  protection  as  against  other  townships  of  the 
county  in  the  payment  of  county  taxes;  and  of  each  individual 
diminishing  his  values  as  a  matter  of  protection  as  against  every 


TAXATION   IN   INDIANA  27 

other  taxpayer  in  the  payment  of  local  taxes.  Overvaluations  are 
usually  the  result  of  accident  or  oversight,  and  most  of  them  are 
discovered  and  rectified  by  taxing  officials.  The  law  sets  forth  the 
true  cash  value  as  the  standard  value.  In  Indiana  we  have  de- 
parted from  the  standard  of  value  and  are  dealing,  with  percentages 
of  it.  This  change  of  standard  has  led  to  increased  inequality. 
Sequestered  property  is  property  withheld,  withdrawn,  or  secluded 
from  the  assessment  roll.  This  is  done  in  some  instances  from  a 
lack  of  knowledge  of  the  law  governing  taxation,  but  more  often 
for  the  purpose  of  escaping  taxation  entirely. 

The  township  assessors  are  the  advance  financial  agents  of  the 
township,  county,  and  State.  Each  assessor  swears  that  he  will 
assess  all  property  at  its  true  cash  value.  What  a  herculean  task 
is  here  implied!  What  an  extensive  scope  for  one's  judgment  to 
exercise  upon !  He  is  presumed  by  the  law  to  be  an  expert  judge 
of  the  value  of  each  grade  of  every  class  of  property  in  his  town- 
ship. The  products  of  the  farm,  factory,  and  mines,  also  .of  bank 
stock,  department  stores,  and  corporations  may  be  required  to  be 
assessed  by  the  same  assessor.  This  requirement  is  not  in  accord 
with  present-day  methods.  Everywhere  in  modern  enterprise 
there  is  division  or  classification  of  labor  except  in  assessing. 
Practically  all  business  organizations  divide  their  work  into  natural 
classes,  and  men  are  assigned  to  their  respective  departments  on 
the  basis  of  adaptability^  to  the  work  to  be  performed.  This  should 
be  so  in  the  matter  of  assessing,  especially  in  cities  where  there  is 
a  great  variety  of  property.  Each  assessor's  judgment  is  best  on 
that  class  of  property  with  which  he  is  most  familiar.  We  have 
tried  this  out  in  a  small  way,  I  might  say  in  as  large  a  way  as  is 
possible  under  existing  conditions,  in  the  assessment  of  the  proper- 
ty in  the  city  of  Richmonfl.  The  greatest  handicap  that  we  en- 
countered in  securing  special  men,  or  experts,  for  their  respective 
classes  of  property  was  the  meager  salary  available  under  the  law 
and  the  short  period  of  employment.  To  get  $5  men  to  consent  to 
work  for  $2  is  not  an  easy  task.  But  we  succeed  in  getting  a  few 
of  that  kind.  For  the  past  two  years  we  have  assigned  to  a  deputy 
who  is  an  ex-manufacturer  and  business  man  the  assessment  of  all 
banks,  corporations,  and  factories.  A  retired  merchant  was  se- 
cured to  assess  all  retail  establishments.  For  the  assessments  of 
real  estate  improvements  we  were  able  to  procure  two  men  who  have 
had  experience  in  dealing  in  real  estate  in  the  city  of  Richmond 
and  in  making  various  appraisrnents  of  property.  The  results  of 


28  INDIANA    UNIVERSITY 

this  experiment  have  been  most  gratifying.  Not  only  have  the 
assessments  been  materially  increased,  but  the  contention  has  de- 
creased as  well.  The  assessors  were  as  well  versed  in  values  as  the 
owners  of  the  property  themselves,  and  the  persons  being  assessed 
recognized  this  fact,  and  in  this  the  chief  value  of  the  plan  lay. 
The  increase  in  revenue  from  these  assessments  paid  the  salaries 
of  these  special  assessors  many  times  over.  These  assessors  were 
subject  to  the  call  of  the  board  of  review  during  its  entire  session 
to  assist  the  board  in  the  review  for  the  purpose  of  equalization  of 
any  assessments  made  by  any  of  them.  By  that  method  the  board 
had  the  benefit  of  additional  information  that  the  assessor  might 
be  able  to  give  regarding  the  assessment.  Both  sides  of  the  case 
were  represented.  The  board  was  thus  safeguarded  against  any 
advantage  that  might  be  taken  in  the  absence  of  the  assessor  who 
made  the  assessment.  Even  the  presence  of  these  assessors  before 
the  board  was  helpful,  by  preventing  efforts  for  unjust  reductions 
that  might  have  otherwise  been  made. 

The  township  assessor  should  take  an  active  part  in  the  assess- 
ment of  each  individual  and  use  his  judgment  also  on  the  fixing  of 
values.  This  is  implied  in  the  oath  taken  by  the  assessor,  also  by 
the  prescribed  form  of  blanks  used  which  provides  a  special  column 
for  the  valuation  of  the  assessor.  Too  many  persons  are  permitted 
to  assess  themselves.  By  this  method  many  men  are  apt  to  be  pretty 
fair  to  themselves.  To  simply  call  and  leave  a  sheet  to  be  filled  out 
and  called  for  later  is  not  assessing.  The  assessor  has  entirely  neg- 
lected to  perform  his  function  in  the  assessment.  Any  schoolboy 
could  do  as  much,  and  could  probably  excel  in  that  he  could  travel 
around  faster.  It  is  the  assessor's  duty  to  satisfy  himself  as  to  the 
sufficiency  of  the  amounts  returned,  and  he  should  be  equally  ready 
to  raise  an  amount  given  in  too  low,  or  to  lower  one  given  in  too 
high. 

The  township  assessor  is  not  a  well-paid  official.  He  is  probably 
the  poorest  paid  officer  in  the  State.  Assessing  is  not  his  principal 
occupation,  since  he  is  employed  only  a  few  weeks  each  year.  He 
usually  has  made  no  special  preparation  or  study  for  his  work. 
The  law  does  not  require  it ;  neither  could  he  afford  to  do  it. 

The  law  sets  no  absolute  standard  of  values  for  him  to  follow. 
The  assessor  is  thrown  somewhat  on  his  own  resources.  With  the 
very  best  efforts  on  the  part  of  every  assessor — and  most  assessors 
are  conscientious  in  their  work — the  assessment  roll  of  a  county  will 
show  considerable  inequality  due  to  the  fallibility  of  human  judg- 


TAXATION    IN    INDIANA  29 

merit.  Sufficient  salary,  permanency  of  employment,  and  promo- 
tion for  efficient  services  rendered,  which  are  attractive  features  of 
many  other  vocations,  are  almost  wholly  lacking  in  the  present 
methods  employed  in  assessing. 

All  assessors  go  out  of  office  this  year,  and  the  most  important 
task  of  their  whole  term,  the  assessment  of  real  estate,  will  neces- 
sarily have  to  be  done  by  new  and  untried  officials.  It  would  cer- 
tainly be  better  to  have  their  term  of  office  so  timed  that  the  assess- 
ment of  real  estate,  which  is  of  greatest  importance,  and  which 
stands  for  four  years,  could  be  made  on  the  last  year  of  their  term 
and  thereby  have  the  benefit  of  their  experience  of  the  three  former 
years. 

The  county  board  of  review  meets  annually  on  the  first  Monday 
in  June  for  the  purpose  of  assessment,  review,  and  equalization  of 
taxes.  The  board  has  the  power  to  hear  complaints  of  any  owner 
of  property  and  also  has  the  authority  to  equalize  the  same  by  add- 
ing to  or  deducting  from  the  valuation  as  returned  by  the  assessor. 
But  many  of  the  complaints  that  come  before  the  board  are  found 
to  have  no  justification.  It  is  often  found  that  it  is  the  board's 
duty  to  raise  valuations  instead  of  lowering  them.  And  many  who 
suffer  an  injustice  and  have  a  real  grievance  never  appear  before 
the  board,  either  because  of  a  lack  of  knowledge  or  because  of  a 
lack  of  close  personal  attention  to  the  details  of  their  business. 
Still  others  do  not  discover  that  an  injustice  has  been  done  until 
after  the  board  of  review  has  closed  its  session  and  then  no  one  has 
legal  authority  to  equalize  the  matter.  So  that  at  the  end  of  the 
board's  session  the  assessment  roll  still  contains  many  glaring  in- 
equalities even  after  the  very  best  that  a  board  can  do.  The  board 
does  not  have  the  feeling  that  is  expressed  by  "Well  done,  thou 
good  and  faithful  servant,"  but  rather  a  feeling  of  regret  that  it 
has  not  been  able  to  complete  a  more  perfect  piece  of  work.  The 
board 's  work  is  not  scientific ;  it  is  rather  -a  patchwork  made  by 
taking  off  a  little  here  and  putting  on  a  little  there  so  as  to  correct 
the  worst  places  and  to  strike  the  best  possible  average. 

The  apportionment  of  common  school  revenue  for  tuition  is  an- 
other evidence  of  the  inequality  in  valuations  among  counties. 
State  school  tax  is  produced  by  a  rate  levied  by  the  State  which 
comes  back  to  the  counties  apportioned  on  a  per  capita  basis  ac- 
cording to  the  number  of  school  children.  The  intent  of  this  law 
providing  the  per  capita  plan,  giving  the  schools  in  poorly  situated 
counties  equal  advantages  with  schools  in  wealthy  counties,  seems 


30  INDIANA    UNIVERSITY 

so  commendable  that  it  should  create  an  incentive  to  keep  the  law's 
motive  pure ;  but  by  referring  to  a  certificate  of  apportionment  one 
readily  sees  that  the  standard  in  valuations  that  a  county  maintains 
plays  an  equally  prominent  part  with  the  number  of  its  school  chil- 
dren in  the  amount  of  revenue  derived  from  this  source.  Some  of 
our  most  prosperous  counties  are  benefited  by  this  system. 

The  owners  of  modest  homes  in  towns  and  cities  pay  far  in  excess 
of  those  who  have  more  pretentious  homes,  or  of  those  who  have  sub- 
st initial  improvements  on  farms.  By  comparison  it  is  found  that 
city  residences  are  assessed  for  about  twice  the  amount  for  similar 
ones  in  the  rural  districts.  In  Wayne  county,  the  real  estate  in 
rural  communities  and  villages  is  assessed  for  about  40  to  50  per 
cent  of  the  cash  value.  In  the  larger  towns  and  the  city  of  Rich- 
mond the  assessed  valuation  is  from  50  to  60  per  cent  of  the  cash 
value. 

Another  gross  inequality  lies  in  the  fact  that  a  very  large  part 
of  the  property  classed  as  money  on  hand  or  in  bank,  notes  secured 
outside  the  county,  unsecured  notes,  and  other  forms  of  intangible 
property  escapes  taxation  entirely.  The  investment  in  non-taxable 
securities,  moreover,  has  increased  to  such  extent  that  whether  we 
would  have  it  so  or  not,  we  are  gradually  drifting  to  the  Henry 
George  theory  of  single  taxation. 

The  assessment  of  property  and  the  collection  of  taxes  in  Wayne 
county  one  hundred  years  ago  and  now  are  of  interest.  The  tax 
collections  in  Wayne  county  in  the  year  1813  were  as  follows : 

First-rate  lands,  5,711  acres $17  81 

Second-rate  lands,  5,607  acres 123  21 

Third-rate  lands,  23,001  acres 28  75 


Total  taxes  collected  on  real  estate..  $160  77 

Horses $221  25 

Stallions  8  00 

Negroes 20  00 


Total    taxes    collected    on    personal 

property   $249  25 


Total  taxes  collected  during  the  year $419  02 

Taxes  on  personal  property  60  per  cent,  and  on  real  property  40  per  cent. 

In  1913,  just  100  years  later,  the  assessments  were  as  follows : 


TAXATION     IN     INDIANA  31 

Real  estate  assessments $22,095,980  00 

Less  mortgage  exemptions 1,030,160  00 


Net  real  estate  assessment $21,065,820  00 

Personal  and  corporations 14,278,765  00 


Total  net  assessment $35,344,585  00 

Real  estate  assessment  60  per  cent,  and  personal  40  per  cent. 

• 

It  so  happens  that  in  Wayne  county  the  percentages  have  just 
shifted  positions,  from  60  per  cent  personal  and  40  per  cent  real, 
100  years  ago,  to  40  per  cent  personal  and  60  per  cent  real  in  1913. 
At  that  same  rate  in  200  years  real  estate  will  be  carrying  the  whole 
burden  of  taxation  in  Wayne  county. 

With  the  increase  of  the  amount  of  intangible  property,  which 
is  more  difficult  to  assess  properly,  and  with  a  disposition  on  the 
part  of  the  many  who  undertake  to  escape  a  part  or  all  of  their 
share  of  taxes,  the  matter  of  assessment  of  property  is  each  year 
becoming  a  more  difficult  task,  and  each  year  demands  more  skill 
and  understanding  on  the  part  of  the  assessor  to  enable  him  to  cope 
with  the  situation.  The  present  assessment  laws  are  weak  in  more 
than  one  respect,  but  their  greatest  weakness,  in  my  judgment,  lies 
in  the  fact  that  their  administration  lacks  authority.  Our  assessing 
laws  are  somewhat  similar  to  the  Articles  of  Confederation,  a  code 
of  laws  for  the  government  of  the  colonies  at  the  close  of  the  Revo- 
lution. They  provided  for  legislative  and  judicial  departments, 
but  did  not  provide  for  an  executive  department.  Many  good  laws 
were  passed  and  courts  were  amply  provided  to  explain  them,  but 
there  was  no  department  to  enforce  them  and  compel  obedience,  and 
the  people  soon  refused  to  heed  them.  Just  so  with  assessing.  The 
county  assessor  or  the  board  of  review  has  no  power  or  authority 
to  remove  any  assessor,  or  to  order  a  reassessment,  or  otherwise  ques- 
tion any  act  of  an  assessor,  except  on  appeal.  Neither  can  they 
enforce  any  uniform  standard  of  valuations.  The  result  of  this 
condition  is  that  there  can  be  no  such  thing  as  county-wide  equality, 
much  less  State-wide  equality  of  assessments  unless  there  is  some 
way  provided  to  control  the  initial  assessments  and  the  assessor 
who  makes  them.  If  the  assessing  of  all  property  in  a  State  were 
made  by  some  centralized  body,  such  as  a  tax  commission,  there 
would  be  practically  no  equalization  necessary,  as  all  property 
would  then  be  assessed-  by  the  same  methods,  the  same  rules,  aijd 
the  same  standard  of  values. 


32  INDIANA   UNIVERSITY 

Another  difficult  problem  in  county  finance  is  how  to  meet  a 
growing  demand  for  public  improvements  with  a  limited  expendi- 
ture of  funds;  to  procure  the  most  obtainable  for  the  least  outlay 
of  money ;  to  meet  new  and  additional  requirements  with  the  least 
possible  advance  of  the  tax  rate.  Our  people  are  demanding  more 
from  the  public  than  formerly  and  few  new  sources  of  income  have 
been  secured.  The  high  cost  of  living  affects  counties  as  it  does 
families  or  individuals.  Many  new  statutory  requirements  demand 
additional  expenditures.  The  State  Board  of  Health  raises  the 
standard  for  public  health. ,  Inmates  of  charitable  and  penal  in- 
stitutions are  better  fed  and  better  housed  than  formerly ;  also  the 
number  of  inmates  is  rapidly  increasing.  Each  legislature  passes 
new  laws,  many  of  which  require  new  and  additional  expenditures 
of  money.  The  prices  of  food  products,  fuel,  and  labor  have  ad- 
vanced. Modern  modes  of  travel  require  that  all  streams  be 
bridged.  The  good-roads  movement  has  necessitated  a  large  ex- 
penditure of  funds.  In  many  counties  in  the  State  the  Three-Mile 
road  law  has  been  the  means  of  making  many  extensive  road  im- 
provements, for  which  ten-year  bonds  have  been  issued,  and  the 
tax-rate  materially  increased.  In  Wayne  county  there  have  been 
improved  under  this  law  28.28  miles  of  roads  at  a  total  cost  of 
$388,540,  or  $1,375  per  mile,  the  effect  of  which  has  been  an  increase 
in  the  tax-rate  from  2  to  37  cents  on  each  $100.00  in  the  various 
taxing  districts  in  which  the  improvements  have  been  made.  It  is 
a  fact  that  the  tide  of  taxation  is  rising,  and  it  is  rising  because  we 
are  demanding  that  government  perform  new  functions  and  also 
that  the  old  functions  be  more  perfectly  administered. 

The  county  council  has  the  exclusive  power  of  making  appro- 
priations of  money  to  be  paid  out  of  the.  county  treasury,  also  the 
power  to  fix  the  rate  of  taxation  so  as  to  produce  sufficient  revenue 
for  the  needs  of  the  county  government  and  its  institutions.  In  de- 
termining the  amount  of  the  rate  many  boards  in  their  eagerness 
to  keep  the  rate  as  low  as  possible  do  not  attach  sufficient  impor- 
tance to  special  appropriations  for  unanticipated  improvements, 
emergencies,  and  the  like,  which  are  not  included  in  the  annual  esti- 
mate for  the  purpose  of  rate-making.  Unless  these  unanticipated 
needs  are  carefully  guarded  against  the  general  fund  of  the  county 
may  be  reduced  by  such  special  appropriations  to  the  extent  of  caus- 
ing an  overdraft  on  this  fund.  In  determining  the  rate  a  reason- 
able amount  should  be  anticipated  for  emergencies  and .  provided 
for.  County  officials  should  live  more  nearly  within  their  esti- 


TAXATION   IN   INDIANA  33 

mates,  and  make  their  estimates  so  complete  that  living  within 
them  can  be  more  nearly  accomplished.  They  should  limit  their 
expenditures  to  the  estimates  made  for  the  purpose  of  rate-mak- 
ing1, or  raise  the  rate  in  anticipation  of  additional  expenditures 
very  probably  needed.  The  public  funds  should  be  economized  as 
carefully  as  the  tax-rate;  the  one  can  not  be  high  and  the  other 
low.  We  can  not  be  liberal  with  the  one  and  stingy  with  the  other. 
We  can  not  draw  freely  on  one  and  practice  economy  with  the  other. 
As  one  determines  the  amount  of  the  other  their  relation  to  each 
other  is  inseparable.  They  must  go  high  or  go  low  together.  The 
rate  is  only  a  matter  of  calculation.  Real  economy  consists  in  care- 
fully guarding  the  expenditures,  and  the  matter  of  the  tax-rate  will 
take  care  of  itself. 

The  inequality  of  the  burden  of  taxation  does  not  end  with  the 
assessment  of  property,  but  asserts  itself  again  at  tax-paying  time. 
The  amount  of  delinquent  taxes,  especially  in  counties  containing 
the  larger  cities,  is  steadily  increasing,  and  constitutes  a  problem 
of  considerable  moment,  since  it  involves  a  large  loss  of  revenue 
in  the  State.  Taxes  are  defined  as  enforced  contributions  from  per- 
sons and  property  for  the  support  of  the  government  and  all  public 
needs.  The  word  "enforced"  is  very  aptly  used,  as  it  requires 
more  force  than  we  now  seem  to  possess  to  successfully  collect 
them.  As  the  law  provides  for  the  sale  of  delinquent  real  estate 
on  the  second  Monday  in  February  of  each  year,  and  as  the  taxes 
on  all  valuable  property  are  obtained  from  the  proceeds  of  the 
sale,  there  is  no  great  loss  on  this  class  of  assessment.  The  law 
provides  that  it  shall  be  the  duty  of  the  auditor  of  each  county 
on  or  before  the  first  day  of  June  and  the  first  day  of  December 
of  each  year  to  furnish  to  the  treasurer  of  each  city,  town,  and 
township  in  his  county,  and  to  the  treasurer  of  such  county,  a  com- 
plete list  of  all  persons  reported  as  delinquent  in  the  payment  of 
taxes  as  shown  by  the  tax-duplicate  in  the  office  of  the  auditor.  It 
shall  be  the  duty  of  the  treasurer  of  each  city,  town,  township,  or 
county  to  deduct  from  any  money  due  to  any  person  whose  name 
is  found  on  such  delinquent  list  a  sum  equal  to  the  amount  of  the 
delinquent  tax  and  pay  the  same  into  the  county  treasury  in  satis- 
faction of  such  taxes.  This  is  a  good  trap  to  catch  a  habitual  tax- 
dodger  one  time,  but  it  seldom  works  a  second  time.  In  our  county 
the  collections  made  in  this  manner  amount  to  but  a  few  hundred 
dollars  each  year.  This  law  is  in  no  wise  a  solution  to  the  problem 
of  delinquency.  The  writer  could  never  understand  why  school 

3—2902 


34  INDIANA   UNIVERSITY 

boards  were  not  included  in  the  provisions  of  this  act.  Why  should 
there  be  a  favored  class? 

The  law  also  provides  that  after  the  first  Monday  in  May  the 
county  treasurer  is  authorized  to  call  either  in  person  or  by  deputy 
upon  every  person  named  in  the  duplicate  who  is  delinquent,  and 
to  make  a  demand  for  the  amount  of  such  delinquent  taxes  of 
each  resident  delinquent,  and  if  the  taxes  and  penalty  are  not  paid 
on  such  demand  he  shall  proceed  immediately  to  levy  on  sufficient 
personal  property  of  such  delinquent  to  pay  such  taxes,  penalty, 
and  costs  of  sale,  and  to  sell  the  same  as  prescribed  by  law.  And 
here  is  where  the  real  problem  of  delinquency  is.  The  law  gov- 
erning the  sale  of  delinquent  real  estate  is  carried  out  to  the  letter. 
The  law  governing  levy  and  sale  of  personal  property  is  wholly 
disregarded,  except,  as  we  are  informed,  in  the  capital  city  of  the 
State.  And  why?  In  the  first  place  many  of  this  class  of  delin- 
quents are  poor  and  needy  and  have  a  pretty  hard  time  to  make 
ends  meet,  and  public  sentiment  will  not  stand  for  the  taking  away 
of  some  of  their  limited  amounts  of  household  goods.  They  may 
be  of  considerable  worth  to  the  owner  but  would  bring  little  at 
forced  sale  as  second-hand  goods.  Among  the  poorer  classes  the 
township  trustee  might  be  appealed  to  to  replace  the  articles  thus 
lost.  Most  treasurers,  not  desiring  to  take  upon  themselves  the 
task  of  classifying  those  delinquents  against  whom  the  law  ought 
to  be  enforced,  and  those  against  whom  it  should  not,  do  not  levy 
against  any  personal  property.  This  shirking  of  the  responsibility 
of  discrimination  lays  down  the  bars  and  is  taken  advantage  of  by 
many  persons  who  are  amply. able  to  pay  their  taxes.  Most  treas- 
urers make  their  demands  by  mailing  a  delinquent  notice,  or  state- 
ment of  the  amount  of  the  taxes  due,  and  few,  if  any,  personal 
demands  a*re  made.  Please  permit  me  to  go  back  home  for  another 
illustration,  as  I  am  more  familiar  with  the  conditions  there. 

In  Wayne  county  in  the  year  1912  there  were  20,441  names  on 
the  treasurer's  tax-duplicate.  Of  these,  on  December  31,  1912, 
there  were  delinquencies  as  follows:  614  were  delinquent  on  real 
estate,  owing  $12,739.52 ;  4,930  were  delinquent  on  personal  and 
polls  for  the  sum  of  $26,324.92.  The  total  number  delinquent  was 
5,544  and  the  total  amount  was  $39,064.44,  which  was  27  per  cent 
of  the  whole  number  of  taxpayers,  and  the  amount  delinquent  was 
5  per  cent  of  the  whole  amount  of  taxes  charged.  Seventy-three 
per  cent  had  paid;  twenty-seven  per  cent  had  not.  In  1913  there 
were  21,302  names  on  the  treasurer's  tax-duplicate.  Of  these,  on 
December  31,  1913,  606  were  delinquent  on  real  estate,  owing  the 


TAXATION    IN    INDIANA  35 

sum  of  $9,203.91;  6,979  were  delinquent  on  personal  and  poll  tax 
for  the  sum  of  $46,729.26.  The  total  number  delinquent  was  7,585, 
and  the  total  amount  delinquent  was  $55,933.17,  which  was  35  per 
cent  of  the  total  number  of  taxpayers,  and  6  per  cent  of  the  whole 
amount  of  taxes  charged.  Sixty-five  per  cent  of  the  whole  number 
had  paid;  thirty -five  per  cent  had  not  paid.  But,  however,  our 
efforts  do  not  stop  on  December  31.  Of  the  delinquencies. of  1912, 
there  was  collected  in  1913  the  sum  of  $16,550,  which  leaves  a  net 
loss  of  taxes  for  that  year  of  $22,514.44.  In  the  year  1914  there 
has  been  collected  the  sum  of  $17,742.28,  which  leaves  a  net  loss 
of  taxes  for  last  year  of  $38,190.89,  or  about  4  per  cent. 

On  making  an  analysis  of  these  delinquents  we  find  that  the 
largest  portion  are  delinquent  from  choice  and  are  shirking  the 
responsibility  of  citizenship.  Another  class  consists  of  a  shifting 
population  who  are  here  today  and  gone  tomorrow.  There  is  an- 
other class  who  are  unable  by  misfortune,  mismanagement,  lack 
of  ability,  to  pay  taxes.  Another  class  consists  of  those  who  are 
close  run  financially,  and  will  pay  if  given  a  little  time.  Then  there 
is  still  another  class,  those  who  have  been  committed  to  asylums  and 
prisons,  and  those  who  have  died  since  their  assessments  were  made. 
A  year  makes  great  changes  in  the  population  of  a  county  or  State. 

But  as  stated  before,  the  largest  portion  of  the  delinquency  on 
personal  property  is  taxes  owing  by  those  who  are  able  to  pay  if 
they  would,  and  who  are  purposely  sidestepping  a  duty  they  owe  to 
society.  And  the  law  should  be  made  to  operate  against  them  as 
certainly  as  it  does  against  the  owner  of  delinquent  real  estate, 
from  which  there  is  no  escape.  Non-enforcement  of  law  soon  re- 
sults in  a  disrespect  for  it.  It  is  not  uncommon  that  delinquents 
are  the  harshest  critics  of  how  the  government  is  run.  Some  of 
them  are  heard  to  complain  loudest  of  extravagance  of  public  ex- 
penditures and  a  high  tax-rate,  and  yet  they  pay  nothing.  And  in 
some  of  the  counties  containing  large  cities  the  number  of  voters 
who  pay  no  taxes  is  sufficiently  large  to  control  the  results  of  elec- 
tions and  thereby  determine  questions  of  vital  importance  to  those 
who  bear  the  burden  of  taxation.  Further,  a  loss  of  4  per  cent, 
year  after  year,  would  be  a  serious  matter  to  a  commercial  enter- 
prise. That  amount  represents  the  net  profit  of  many  concerns. 
In  order  that  any  business  concern  could  succeed  with  such  a  leak- 
age it  would  be  compelled  to  that  extent  to  overcharge  those  who 
do  pay.  That  is  exactly  what  happens  in  taxation.  The  taxes  of 
the  -delinquents  are  shifted  to  shoulders  other  than  their  own 
Those  who  do  pay  are  carrying  a  double  burden. 


.36  INDIANA   UNIVERSITY 

The  exemption  of  a  reasonable  amount  of  personal  property 
from  taxation  so  as  to  work  no  undue  hardship  against  the  modest 
householder,  so  that  treasurers  might  proceed  to  enforce  the  law 
in  the  matter  of  collections  without  criticism,  would  help  materially 
in  the  problem  of  delinquency.  The  term  of  the  county  treasurer 
should  be  extended  to  four  years  instead  of  two  as  at  present. 
In  many  counties  political  custom  gives  treasurers  the  second 
term.  The.  matter  of  re-election  prevents  many  treasurers  from 
applying  the  law  as  vigorously  during  their  first  term  as  they 
would  otherwise.  By  giving  them  a  four-year  term  they  would 
be  less  susceptible  to  political  influence  and  could  enforce  the  law 
in  the  collections  as  they  now  do  with  delinquency  on  real  estate. 

I  have  now  presented  the  problems  of  county  finance  as  I  see 
them,  and  hope  to  hear  what  the  proper  solution  is  for  each  on 
tomorrow  afternoon.  I  realize  that  I  have  taxed  to  the  limit  the 
latitude  given  me,  and  thank  you  for  your  kind  indulgence. 

PROBLEMS  OF  TOWNSHIP  FINANCE 
JAMES  E.  BEERY,  Assessor  of  Center  Township,  Marion  County 

I  just  happened  to  be  a  township  assessor.  I  am  completing 
my  sixth  year  on  the  first  day  of  January.  I  was  elected  in  1908 
and  took  office  in  1909.  At  that  time  the  assessment  of  Center 
township,  of  real  estate,  was  $134,459,960,  and  the  personal  prop- 
erty was  $44,000,000,  making  a  total  of  $174,000,000.  In  1914 
the  valuations  on  real  estate  aggregated  $174,066,000,  and  on  per- 
sonal property  $66,000,000,  making  a  total  of  $234,000,000  tax- 
ables  in  this  township. 

This  township  is  about  as  rich  as  thirty  odd  counties  in  the 
State  of  Indiana.  You  are  talking  about  personal  property.  In 
this  township  the  figures  show  that  we  made  an  increase  of  about 
fifty  per  cent  in  six  years,  $44,000,000  in  1908,  and  $66,000,000 
in  1914. 

I  will  tell  you  how  I  see  this  proposition.  We  have  plenty  of 
law,  but  we  haven't  any  salaries.  There  are  1,017  township  as- 
sessors running  wild  over  this  State.  There  are  800  of  them  that 
are  not  paid  anything.  That  is  a  fact.  Did  you  ever  inquire 
about  a  township  or  county  assessor  to  find  out  how  this  tax  gets 
on  the  tax-duplicate,  or  how  it  doesn't  get  on  the  tax-duplicate? 
The  law  prescribes  that  the  township  assessor  shall  have  two  dol- 
lars and  a  half  a  day  for  a  period  from  the  first  of  March  to 
May  15th.  It  amounts  to  about  sixty-two  or  sixty-three  days. 


TAXATION   IN   INDIANA  37 

He  has  to  furnish  a  horse  and  buggy  with  which  to  do  his  work. 
He  cannot  do  it  in  any  other  way.  If  he  happens  to  have  a  deputy, 
he  pays  him  two  dollars  a  day,  and  he  has  to  furnish  a  horse  and 
buggy.  At  dinner-time,  if  he  is  six  or  seven  miles  out  in  the 
country,  he  has  to  pay  for  his  horse's  dinner,  and  likely  enough 
he  has  to  pay  for  his  own  dinner.  The  assessor  calls  on  a  man 
who  is  busy,  and  cannot  make  out  his  list  just  then,  and  who  says 
leave  a  blank,  so  that  he  may  take  the  matter  up  later  on.  The 
assessor  rnay  go  back  a  dozen  times,  and  still  not  find  the  blank 
filled  out.  Would  you  like  to  be  a  township  assessor  for  two  dol- 
lars and  a  half  a  day  under  the  circumstances  ?  That  is  what  they 
get.  There  are  about  eight  hundred  townships  in  this  State  now 
where  the  township  assessors  get  two  hundred  dollars  a  year.  The 
law  prescribes  that  in  a  township  having  a  population  of  at  least 
twenty  thousand  and  less  than  seventy-five  thousand  the  salary  of 
the  township  assessor  shall  not  be  less  than  eight  hundred  dollars 
and  not  more  than  fifteen  hundred  dollars,  to  be  fixed  by  the  county 
commissioners.  If  the  commissioners  happen  to  be  on  the  opposite 
side  politically,  he  is  likely  to  get  only  eight  hundred  dollars 
although  the  township  may  have  the  maximum  population.  If  he 
is  on  the  same  side  politically  as  the  county  commissioners,  he  may 
get  the  fifteen  hundred  dollars  although  his  township  has  the 
minimum  population. 

There  are  a  good  many  people  who  think  the  assessors  ought 
to  know  or  find  out  about  everything.  They  come  along  and  ask 
him  to  gather  all  sorts  of  statistics.  There  are  about  forty  ques- 
tions on  this  statistical  statement  to  which  they  want  answers. 
Now,  if  these  statistics  are  worth  anything  they  ought  to  be  gathered 
carefully,  and  somebody  ought  to  be  paid  for  gathering  them. 
That  is  the  only  way  the  work  can  be  done  as  it  should  be  done. 
Here  are  some  of  the  questions: 

Total  number  of  dozens  of  hens'  eggs  produced  in  1913,  whether  sold, 
used,  or  still  on  hand? 

Average  number  of  dozens  of  all  kinds  of  laying  hens  in  1913? 

Total  number  of  dozens  of  all  kinds  of  poultry  sold  in  1913? 

Mules  on  hand  January  1,  1914? 

Report  entire  crop  of  clover  hay  produced  in  1913,  whether  sold,  used, 
or  still  on  hand. 

Report  entire  crop  of  clover  seed  produced  in  1913,  rwhether  sold,  used, 
or  still  on  hand. 

Report  entire  crop  of  wheat  produced  in  1913,  whether  sold,  used,  or 
still  on  hand. 

Number  of  acres  of  land  leased  or  rented? 

Number  of  acres  of  waste  land? 


38  INDIANA   UNIVERSITY 

If  those  statistics  are  worth  anything  they  ought  to  be  paid 
for.  That  is  a  cheap  way  to  get  them.  They  haven 't  anything 
to  do  with  the  assessment  law.  In  view  of  the  fact  that  the 
assessor  is  not  paid  anything,  and  has  to  do  all  that  work,  the 
State  Board  came  along  last  year  and  said  he  should  report  on 
the  horses  and  mules,  and  their  actual  value,  and  on  the  cattle, 
hogs,  sheep,  automobiles,  farm  implements,  machinery,  household 
goods,  and  library  of  each  man  who  turned  in  a  personal  list.  I 
took  this  matter  up  with  the  Attorney- General.  He"  said  he  wasn  't 
authorized  to  give  any  opinion  to  anybody  but  State  officials,  but 
his  private  opinion  was  that  we  would  have  to  do  it.  I  figured  that 
if  his  private  opinion  was  that  his  official  opinion  would  be  about 
the  same,  so  we  did  it. 

You  have  no  idea  what  the  township  assessor  is  up  against. 
Did  you  ever  make  any  inqury  about  it?  We  have  a  county  as- 
sessor, but  there  is  nothing  for  him  to  do.  The  county  assessor 
ought  to  be  in  charge  of  these  township  assessors.  Then  you  would 
get  the  assessment  right,  because  you  would  have  somebody  to  see 
that  it  was  right.  Let  me  give  you  an  illustration.  This  city 
stands  in  four  townships.  Thirty-eighth  street  is  the  dividing 
line  between  Center  township  and  Washington  township.  In  1911, 
when  we  made  the  reappraisement  here,  we  made  an  increase  in 
the  mile  square,  from  North  street  to  South  street  and  from  East 
street  to  West  street,  of  fifteen  million  dollars.  I  took  the  matter  up 
with  the  assessor  in  Wayne  township  and  adjusted  with  him  where 
our  increase  should  be,  what  it  should  be  in  Center  and  Wayne 
townships.  We  did  the  same  with  the  assessor  in  Warren  town- 
ship. We  tried  to  do  it  with  the  assessor  in  Washington  town- 
ship. We  made  two  or  three  engagements  with  him,  but  he  broke 
them  each  time.  What  was  the  result?  The  property  on  Wash- 
ington Boulevard  below  Thirty-eighth  street  was  assessed  at  $45 
per  front  foot,  and  north  of  Thirty-eighth  street  it  was  assessed 
at  $15  per  front  foot,  and  it  is  worth  more  north  of  Thirty-eighth 
street  than  it  is  south.  If  you  had  a  county  assessor  to  look  after 
things  like  that  they  could  be  done  a  good  deal  better. 

It  is  the  law  now  that  we  make  a  reappraisement  every  four 
years.  That  is  not  right.  It  ought  to  be  made  every  year.  Very 
seldom  is  the  appraisement  too  high,  because  if  it  is  too  high, 
property-owners  come  in  and  get  it  lowered,  but  if  it  is  too  low 
nobody  pays  any  attention  to  it.  Then  there  is  a  shifting  of 
officials,  and  so  it  goes  on.  That  is  how  it  comes  that  we  had  such 
a  large  increase  in  1911. 


TAXATION   IN   INDIANA  39 

I  will  tell  you  a  little  circumstance.  In  1909  we  had  two  men 
appraising  real  estate.  They  assessed  a  man's  house  out  on  North- 
western avenue,  and  he  said  they  put  it  too  high.  I  said  we  would 
review  it.  And  I  sent  two  other  men  out  there  who  looked  over 
the  property.  The  owner's  wife  didn't  know  who  these  last  two 
were  and  she  told  them  what  a  fine  house  it  was  and  how  much 
it  cost.  They  came  back  and  said  it  was  not  assessed  high  enough ; 
that  the  woman  told  them  that  it  cost  thirty-five  hundred  or  four 
thousand  dollars  to  build  the  house.  The  next  day  the  owner  came 
in  and  laid  a  cigar  down  on  my  desk  and  said,  "The  joke  is  on 
me;  my  wife  thought  those  fellows  wanted  to  buy  the  place." 
So  you  see  it  is  a  different  thing  when  the  man  wants  to  sell  it 
and  when  he  is  giving  it  in  to  the  assessor. 

Take  a  township  like  this,  and  pay  a  man  two  dollars  a  day 
to  go  around  and  appraise  real  estate!  You  all  know  what  is 
involved  in  assessing  the  Severin  Hotel  or  the  Fletcher  Trust 
Company  building.  The  idea  of  paying  a  man  two  dollars  to 
appraise  such  property  as  that  for  assessment!  If  the  owners  of 
either  property  wanted  to  borrow  any  money  on  it,  the  lending 
company  would  get  the  best  real  estate  men  in  town  .and  pay  each 
one  of  them  fifty  or  a  hundred  dollars  for  his  judgment  on  the 
value  of  that  property,  and  then  the  company  would  lend  just 
fifty  per  cent  of  the  value  of  the  property.  Yet  you  are  paying 
men  two  dollars  a  day  to  go  around  and  appraise  that  sort  of 
property.  There  is  your  trouble.  That  is  where  it  begins  and 
where  it  ends. 

As  I  said,  the  public  at  large  all  want  to  "hunch"  a  little.  If 
they  can  beat  the  assessor  and  "get  by"  with  it  they  are  satisfied. 
Nobody  ever  turns  in  any  building  and  loan  association  stock. 
Nobody  thinks  of  turning  in  any  money  in  the  bank,  if  he  can 
help  it. 

A  person  will  turn  in  his  list,  and  you  will  find  that  he  has 
failed  to  list  some  mortgages  that  he  had  last  year,  and  you  call 
him  up  and  ask  about  it  and  he  will  say,  "Oh,  the  assessor  didn't 
ask  me  for  that. ' '  That  is  because  we  have  incompetent  assessors. 
You  cannot  get  competent  assessors  for  two  dollars  a  day.  You 
cannot  and  don't.  And  people  do  not  turn  in  their  property  to 
the  assessor  unless  you  get  after  them. 

Now  every  time  the  legislature  meets  in  this  State  there  is  a 
bill  introduced  to  abolish  the  office  of  county  assessor.  That  is 
because  the  county  assessor  has  found  that  some  friend  of  the 
author  of  the  bill,  or  possibly  the  author  himself,  has  had  some 


40  INDIANA   UNIVEKSITY 

money  invested  in  some  other  county  that  he  wasn't  returning, 
and  called  him  in  and  said,  "Here,  you  have  some  money  invested 
in  such  and  such  a  county  that  you  didn't  list,"  and  made  him 
return  it.  The  county  assessor  of  Marion  county  in  the  year  1912 
put  on  the  tax-duplicate  $1,314,000  valuation  of  that  kind.  The 
taxes  on  that  amounted  to  $25,000  in  money,  and  it  was  paid.  The 
assessor's  salary  is  $2,500.  That  one  item  will  pay  his  salary  for 
ten  years.  And  yet  they  want  to  abolish  that  office  every  time 
the  legislature  meets.  The  county  assessor  ought  to  have  charge 
of  the  township  assessors.  Then  you  would  be  able  to  get  some 
adjustment  and  equalization  of  the  appraisement  of  property  in 
the  adjoining  townships;  and  there  ought  not  to  be  a  reappraise- 
ment  of  the  real  estate  every  four  years,  but  every  year. 

Now  take  the  guardianships  and  the  administratorships,  and 
so  forth.  A  man  is  killed,  and  his  estate  gets  fifteen  hundred 
dollars  perhaps.  His  wife  is  appointed  administratrix.  There 
are  five  or  six  children  in  the  family.  She  cannot  invest  that 
money,  unless  she  invests  it  in  something  that  is  not  taxable,  and 
she  cannot  invest  it  very  well  because  she  has  to  have  the  money, 
she  has  to  use  it,  and  yet  she  is  assessed  on  that  money.  I  do  not 
see  that  it  is  fair  to  tax  her.  That  money  is  simply  that  man's 
wages  paid  in  advance  for  four  or  five  years,  and  I  do  not  think 
it  is  fair  to  tax  it. 

Now,  there  ought  to  be  no  non-taxable  securities.  Absolutely 
none.  All  of  them  ought  to  be  taxed.  People  say  they  have  non- 
taxable  securities  when  they  haven't.  You  ought  to  make  them 
list  all  their  non-taxable  securities.  Half  of  them  are  not  non- 
taxable,  if  you  find  out  what  they  have. 

Another  thing — your  assessment  blank  is  absolutely  wrong. 
You  can  buy  fifty  thousand  United  States  Steel  bonds,  or  any 
railroad  bonds,  and  borrow  forty  thousand  dollars  on  them  from 
a  bank  in  New  York,  where  they  are  dealt  in,  and  you  will  be 
assessed  on  the  equity  you  have  of  ten  thousand  dollars.  If  I 
buy  the  same  amount  of  stock,  common  or  preferred,  and  borrow 
the  same  amount  of  money  from  the  bank,  I  have  no  offset.  I 
am  assessed  the  entire  value  of  it.  The  man  who  has  the  bond 
has  an  underlying  security.  I  have  one  perhaps  that  fluctuates 
in  value,  and  might  be  wiped  out  entirely,  but  it  is  assessed  on 
the  second  page  of  the  assessment  blank,  and  because  it  is  assessed 
on  that  page  I  cannot  offset  anything.  Any  business  man  who  has 
borrowed  three  or  four  thousand  dollars  at  the  bank  can  offset 


TAXATION   IN   INDIANA  41 

that  against  his  credits,  but  I  cannot  offset  this.     That  is  one  of 
the  hard  things  that  you  cannot  get  away  from. 

Did  you  ever  realize  what  you  pay  your  county  officers  in 
salaries?  The  county  treasurer  acts  as  city  treasurer.  The  office 
is  worth  about  forty  thousand  dollars  a  year  in  Marion  county. 
The  sheriff's  office  is  worth  about  twenty-five  thousand,  the  record- 
er's office  about  fifteen,  the  clerk's  office  about  thirty,  and  the 
assessor's  office  in  this  township  thirty-five  hundred.  He  gets  as 
much  in  four  years  as  they  get  in  one,  and  he  does  as  much  work 
in  one  year  as  they  do  in  four. 

The  assessor  has  all  the  hard  work  to  do.  He  has  to  go  out 
and  make  the  assessment.  He  places  the  appraisement  on  every- 
thing. What  does  the  treasurer  have  to  do?  He  tries  to  collect 
that  tax.  That's  all  he  does.  It  is  turned  over  to  him  and  he 
collects  it.  The  recorder  sits  there  in  his  office  and  takes  in  what 
mortgages  and  deeds  are  brought  there  to  be  recorded,  and  he  has 
clerks  to  do  that  work.  The  assessor  comes  in  contact  with  the 
public  all  the  time,  and  he  has  something  to  do  all  the  time.  The 
trouble  with  the  whole  thing  is  the  salary  part  of  it. 

And  then  you  put  a  lot  of  work  on  the  auditor  that  the  county 
assessor  ought  to  do.  He  ought  to  be  in  charge  of  the  township 
assessor's  books  to  see  that  they  are  right.  The  auditor  ought  to 
make  the  tax-duplicate,  but  the  county  assessor  ought  to  have 
charge  of  the  assessor's  books.  That  is  a  way  to  save  a  good  deal 
of  trouble.  There  are  eight  hundred  of  these  township  assessors 
running  around  that  don't  get  any  salary.  Five  of  them  in  this 
county  would  not  run  this  last  year.  There  is  nothing  to  it.  It 
does  not  pay  anything.  That  is  the  whole  trouble  with  your  tax 
system.  You  have  plenty  of  law. 

Take  real  estate.  I  remember  when  we  went  over  to  the  legis- 
lature to  try  to  get  some  relief  for  the  assessor  and  trustee.  There 
were  fellows  writing  in  to  Governor  Marshall  that  they  would  act 
as  assessor  without  any  charge.  Why?  Because  they  probably 
had,  or  their  friends  or  relatives  had,  enough  acreage  so  that  if  they 
could  get  the  value  put  down  on  it,  it  would  be  worth  something  to 
them.  Land  assessed  at  twenty-five  or  thirty  dollars  an  acre  that 
will  sell  for  two  hundred !  Appraisements  in  this  township  for  as- 
sessment are  in  the  neighborhood  of  sixty-five  or  seventy  per  cent 
of  actual  value.  That  is  enough,  because  real  estate  is  subject  to 
special  assessments,  for  parks,  sewers,  alleys,  streets,  and  things  of 
that  kind.  I  remember  when  we  assessed  a  piece  of  real  estate, 


42  INDIANA    UNIVERSITY 

eighteen  feet  on  Washington  street,  at  five  thousand  dollars,  and  the 
owner  set  up  a  plea  that  because  he  had  .a  building  on  it  he  ought  to 
be  assessed  for  only  sixteen  feet,  for  the  walls  occupied  two  feet  of 
that  ground. 

Now  I  think  I  have  got  most  of  this  out  of  my  system,  but  there 
are  one  or  two  other  matters  I  want  to  say  something  about. 

Your  board  of  review  is  not  in  session  long  enough.  The  men 
who  are  appointed  on  it  don't  know  anything  about  it,  and  don't 
know  what  they  are  going  to  do.  Here  they  are  sitting  on  this 
board  of  review  for  thirty  days.  The  first  appellant  that  comes  in 
is  probably  a  brewery  corporation,  the  next  is  a  real  estate  firm,  the 
next  will  be  a  piano  company,  and  the  next  will  be  something  else. 
How  are  you  going  to  get  those  values  adjusted,  and  things  system- 
atized ?  What  you  should  do  is  to  pay  a  competent  man  to  do  this 
wrork.  In  this  township  we  spend  seventeen  thousand  dollars  a 
year  for  outside  help,  but  we  can  pay  an  assessor  only  two  dollars 
a  day.  I  can  take  that  seventeen  thousand,  spend  twelve  thousand 
dollars  of  it,  save  five  thousand  dollars,  pay  assessors  five  dollars  a 
day,  and  add  to  the  tax-duplicate  a  million  or  two  million  dollars  of 
personal  property. 

Now  that  is  the  way  I  see  the  situation.  The  trouble  is  with 
your  taxing  law.  The  assessors  don't  get  the  property  on  the  du- 
plicate because  they  are  not  equipped  to  get  it.  Take  the  outside 
townships.  They  tell  me  they  haven't  any  platbooks  to  amount  to 
anything.  How  are  they  going  to  assess  property?  An  assessor 
in  Richmond  told  me  he  started  his  men  out  in  1911  from  the  center 
of  the  city.  Going  up  one  street  the  first  block  was  number  one, 
and  the  next  block  was  number  two ;  but  if  lie  didn  't  have  the  num- 
ber of  feet  in  the  lots  how  could  he  make  a  proper  assessment  ?  And 
an  assessor  in  Anderson  told  me  he  didn't  have  any  platbooks  there, 
and  he  told  me  of  a  piece  of  property  that  was  off  the  tax-duplicate 
for  twenty-six  years.  One  of  the  railroads  owned  one-half  of  a 
piece  of  property  and  a  woman  owned  the  other  half,  and  she  is 
taxed  for  her  half  and  the  railroad  company  is  not  taxed  for  its 
part. 

The  great  trouble  is  that  you  don't  pay  your  assessors  anything, 
and  until  you  pay  what  a  good  man  is  worth  you  cannot  hire  good 
men.  Do  you  know  that  in  some  of  these  townships  there  are  as- 
sessors that  cannot  write  their  names  ?  How  a  man  can  be  an  as- 
sessor who  cannot  write  his  own  name  is  beyond  me.  Gentlemen, 
I  thank  you. 


TAXATION    IN    INDIANA  43 

GROWTH  OF  TAXES  AND  PUBLIC  EXPENDITURES 
DB.  JOHN  L.  COULTER,  United  States  Census  Bureau 

After  all  these  very  interesting  addresses  I  don't  know  where 
my  little  story  comes  in  at  all.  It  seems  so  far  away  from  the  real 
problem  that  you  are  considering  here.  However,  I  shall  not 
waver  in  my  determination  to  tell  it,  because  I  remember  the  ex- 
perience of  the  small  boy  in  school  who  protested  many  times 
against  appearing  on  the  program,  but  the  teacher  insisted  upon 
teaching  him  his  "piece"  and  insisted  upon  his  appearing  before 
the  audience  and  delivering  it.  After  he  had  labored  through  the 
whole  story  he  took  his  seat,  and  there  was  absolute  silence  in  the 
room  for  a  moment,,  and  then  an  old  Quaker  got  up  and  said :  ' '  Thee 
did  the  best  thee  could;  thee  is  not  to  blame;  the  chastisement 
should  rest  upon  those  who  put  thee  upon  the  program."  I  hope 
you  will  not  blame  me,  if  the  story  which  I  have  is  not  as  personal 
and  as  important  in  your  individual  experiences  as  the  one  you  have 
just  been  told ;  but  I  want  first  to  say  that  this  question  is  interest- 
ing and  commanding  the  attention  of  people  in  all  corners  of  the 
United  States,  and  really  of  all  the  world.  I  shall  not  branch  out- 
side of  the  United  States,  but  only  tell  you  something  of  the  move- 
ment on  foot  in  the  country  as  a  whole. 

Some  ten  years  ago  a  study  was  made  of  the  taxation  and  rev- 
enue systems  of  the  United  States  by  the  federal  government.  At 
that  time  the  investigation  was  carried  on  over  a  period  of  five  or 
six  years,  and  a  very  elaborate  report  prepared ;  but  by  the  time  it, 
was  published  the  information  was  five  years  old  and  considered 
history  and  not  practical,  up-to-date  information.  During  the  last 
few  years  there  has  been  such  an  increase  in  the  cost  of  government 
that  another  investigation  was  proposed;  and,  about  a  year  ago, 
Congress  appropriated  a  small  sum  of  money  to  carry  on  this  study. 

I  am  pleased  to  be  able  to  report  that  within  a  very,  few  weeks 
all  of  the  reports  will  be  off  of  the  public  press,  and  I  want  to  tell 
you  in  just  a  word  or  two  what  the  reports  contain. 

In  the  first  place,  there  are  meetings  all  over  the  United  States 
from  day  to  day,  gatherings  like  this  one,  where  people  are  discuss- 
ing local  problems,  and  wondering  what  is  being  done  in  the  neigh- 
boring community  or  city.  The  purpose  of  this  national  investi- 
gation was  to  systematize  the  whole  thing,  and  bring  together  in- 
formation from  every  community  in  the  United  States. 

The  first  phase  of  the  subject  attacked  was  the  question  of  laws 
and  constitutions,  A  group  of  technical  specialists,  not  paid  two 


44  INDIANA   UNIVERSITY 

dollars  a  day  but  paid  in  proportion  to  their  abilities  probably,  got 
hold  of  all  the  constitutions  of  all  the  States,  all  the  State  laws,  all 
the  session  laws  up  to  date,  all  the  administrative  and  executive 
orders,  all  the  decisions  which  had  been  handed  down,  and  went 
through  them  and  systematized  them  and  annotated  them  and  di- 
gested them,  and  have  reduced  this  body  of  laws  into  a  systematic 
form,  and  the  bulletin  is  now  on  the  press  which  carries  this  infor- 
mation ;  so  that  if  any  one  wishes  to  know  what  is  being  done  in  the 
other  forty-seven  States  on  the  matter  of  special  assessment  of  per- 
sonal property,  real  property,  poll  tax,  or  any  other  phase  of  the 
taxing  system,  you  may  get  that  pamphlet,  and  by  reference  to  the 
index  find  the  exact  provision  in  any  other  State. 

This  pertains  not  only  to  the  State  rules  and  municipal  rules 
but  to  the  regulations  governing  counties,  townships,  municipalities 
and  all  similar  units. 

Another  part  of  the  investigation  was  to  ascertain  the  extent  to 
which  our  national  and  State  and  local  governments  were  going 
into  debt.  We  know  it  is  a  fact  that  millions  and  tens  of  millions' 
worth  of  bonds  are  being  issued,  road  bonds  and  county  bonds  and 
all  types  of  bonds.  We  know  also  that  a  great  m'any  units  do  not 
provide  for  a  sinking-fund,  and  that  a  courthouse  may  be  built  and 
after  a  few  years  may  burn  down,  and  the  county  may  lose  the 
entire  amount  originally  borrowed,  and  there  is  no  sinking-fund  to 
take  care  of  the  difficulty  there. 

The  second  investigation  then  has  covered  each  of  the  forty- 
eight  States  and  the  three  thousand  counties  in  the  States,  and  all 
the  cities,  towns,  and  villages  down  to  the  smallest  borrowing  town- 
ship, trying  to  find  out  what  is  the  total  amount  of  outstanding  in- 
debtedness and  what  are  the  burdens  which  we  are  putting  on  to 
the  next  generation.  In  this  study  the  investigation  not  only  in- 
cluded bonded  indebtedness  but  covered  also  all  incidental  or  float- 
ing debts  of  various  kinds,  such  as  short  term  obligations.  It  also. 
in  each  case,  tried  to  ascertain  the  amount  of  sinking-fund  assets 
available,  and  all  other  investments  and  funds. 

This  particular  report,  so  far  as  the  nation  and  forty-eight 
States  are  concerned,  is  already  a  small  public  document.  By  re- 
ference to  it  you  may  see  just  how  your  own  State  stands  compared 
with  other  States;  how  much  more  you  are  in  debt,  or  how  much 
better  off  you  are.  Both  total  amounts  and  per  capita  debts  are 
given. 

There  was  still  a  further  investigation,  not  merely  of  tax  sys- 
tems, not  merely  of  outstanding  obligations  and  sinking-fund  assets, 


TAXATION   IN   INDIANA  45 

but  of  the  cost  of  running  the  government  on©  year.  What  does 
it  cost  to  run  the  national  government  one  year?  What  does  it 
cost  to  run  the  forty-eight  States,  the  three  thousand  county  govern- 
ments, the  thousands  of  city  governments,  as  well  as  the  minor  civil 
divisions  of  the  country?  In  a  report  published  some  ten  years 
ago  the  estimate  was  that  it  cost  us  in  the  United  States  to  run  our 
government  $1,775,000,000  a  year.  Estimates  current  at  the  pres- 
ent time  seen  to  indicate  that  the  cost  of  carrying  on  our  govern- 
ment each  year  is  something  like  $3,000,000,000.  This  investiga- 
tion, which  is  practically  completed,  the  reports  being  on  the  press, 
has  in  mind  to  show  in  detail  what  it  actually  does  cost  to  run  the 
government  for  one  year,  and  to  show  how  that  money  is  expended, 
what  are  the  different  items  of  expenditure;  and  on  this  subject  to 
show  where  the  money  comes  from,  how  much  is  derived  from  cus- 
toms revenues,  internal  revenues,  liquor  licenses,  real  property  tax, 
persona]  property  tax,  special  assessments,  and  from  other  sources 
of  revenue. 

The  reason  I  spend  five  minutes  referring  to  that  report  is  be- 
cause I  believe  that  if  you  know  the  truth  and  have  the  facts  before 
you,  you  can  more  successfully,  more  intelligently  study  the  thing 
out  and  determine  upon  a  good  program  to  pursue.  It  is  necessary 
first  to  gather  the  information  to  see  really  what  the  situation  is, 
and  then  it  is  much  easier  to  map  out  the  program ;  it  is  much  easier 
if  you  know  how  cities  of  other  States,  and  other  cities  of  the  same 
State,  and  other  counties  are  carrying  on  business  of  the  same  type. 
It  is  important  just  as  it  is  important  for  every  business  man  to 
know  what  other  business  men  in  the  same  general  line  are  doing, 
and  how  and  why  they  are  making  a  success. 

Now  just  a  few  facts  a,s  to  some  of  the  things  which  have  been 
ascertained  and  some  of  the  results  which  have  been  completed. 
We  are  all  of  the  general  opinion,  and  point  to  the  fact,  that  Con- 
gress is  a  terribly  expensive  body,  and  public  opinion  seems  to  be 
that  Congress  each  year  goes  up  about  a  billion  dollars  over  the  pre- 
ceding year,  and  that  they  think  because  they  are  able  to  get  money 
they  are  able  also  to  spend  it  in  great  amounts.  I  must  confess 
that  I  personally  was  very  greatly  surprised  in  examining  the 
records  from  ten  years  ago  to  the  present  time,  after  eliminating  all 
bookkeeping  accounts,  all  of  these  transfer  payments  back  and  forth, 
all  these  non-governmental  cost  payments,  to  find  that  the  increase 
in  the  national  expenditures  in  ten  years,  the  increase  per  capita, 
is  only  between  fourteen  and  fifteen  per  cent.  The  increase  in  ten 
years,  the  increase  in  the  per  capita  cost  of  maintaining  the  national 


46  INDIANA    UNIVERSITY 

government  through  all  its  various  departments,  the  army,  the  navy, 
the  educational  department,  all  of  our  river  and  harbor  improve- 
ments, the  building  of  public  buildings,  of  post-office  buildings  and 
all  the  rest,  is  only  between  fourteen  and  fifteen  per  cent.  You  may 
challenge  that  statement.  The  public  document  containing  all  the 
details  is  now  on  the  public  press,  and  I  have  the  proof  of  it  here. 
The  items  are  all  set  down  clearly,  copied  directly  from  the  reports 
of  the  Treasurer  of  the  national  government. 

The  next  governmental  unit  smaller  than  the  nation  is  the  State. 
There  are  forty-eight  of  them,  and  it  would  be  interesting  to  see  how 
your  own  State  compares  with  the  movement  in  the  other  States. 
In  the  last  ten  years,  taking  the  total  for  the  forty-eight  States, 
there  has  been  an  increase  in  the  actual  expenditures,  excluding 
again  all  merely  bookkeeping  accounts  and  transfer  payments,  etc., 
of  over  one  hundred  per  cent,  showing  that  sometimes  we  may  be 
inclined  to  cover  our  owrn  affairs  at  home  by  calling  attention  to 
things  more  distant  from  us.  There  has  been  an  increase,  taking 
the  total  for  the  forty-eight  States,  of  one  hundred  and  five  per  cent 
in  the  actual  cost  of  carrying  on  the  State  governments. 

This  is  not  a  limited  phenomenon.  This  is  not  limited  to  any 
one  State,  or  any  one  group  of  States.  There  is  no  State  or  group 
of  States,  north  or  south,  east  or  west,  which  has  not  shown  an  in- 
crease of  fifty  per  cent  or  more. 

MR.  AARON  JONES  (of  South  Bend)  :     Is  that  per  capita? 

PROFESSOR  COULTER:  This  is  the  total  expenditure.  The  ac- 
tual per  capita  increase  is  seventy-two  per  cent,  the  increase  in 
population  being  about  twenty-one  per  cent,  offsetting  some  of  the 
increase  in  the  actual  total  amount. 

The  increase  then  for  forty-eight  States  is  a  common  increase 
throughout  the  United  States.  The  New  England  States  show  their 
large  increase,  the  Southern  States  show  their  large  increase,  the 
Northern  States,  the  Western  States,  every  group  of  States  shows 
this  very  large  increase ;  but  the  per  capita  is  more  important  than 
the  total.  The  reason  I  gave  it  first  is  because  the  population  in- 
crease varied  so  much  from  State  to  State.  Some  States  had  an  ac- 
tual falling  off  in  population  with  an  increase  in  expenditures, 
while  most  of  the  States  had  an  increase  in  population  and  an  in- 
crease in  expenditures.  Taking  the  per  capita  movement  for  the 
country  as  a  whole,  we  find  an  increase  of  about  seventy-two  per 
cent. 


TAXATION    IN   INDIANA  47 

The  actual  cost  of  carrying  on  the  forty-eight  State  governments 
ten  years  ago  was  one  hundred  and  eighty-six  million  dollars.  The 
report  which  I  have  here  in  plate  proof,  which  will  come  from  the 
press  in  a  day  or  two,  shows  that  the  cost  during  the  last  year 
was  three  hundred  and  eighty-three  million  dollars.  This,  as  al- 
ready indicated,  is  an  increase  of  seventy-two  per  cent  in  the  cost 
per  individual,  per  capita,  for  the  forty-eight  States. 

The  report  to  which  I  refer  will  carry  information  showing  the 
source,  showing  how  much  the"  State  gets  from  each  different  source, 
all  of  the  different  sources  being  shown  in  detail.  It  also  will  show 
what  became  of  the  money,  how  the  money  was  spent,  and  what  the 
change  has  been  in  the  ten-year  period. 

Merely  in  passing,  and  not  because  I  am  any  more  interested  in 
the  State  of  Indiana  than  in  any  other  State,  I  jotted  down  two  or 
three  of  the  figures  for  Indiana,  so  that  you  may  see  just  how  it 
compares  with  the  other  forty-seven  States. 

In  the  ten-year  period  the  cost  of  conducting  the  State  govern- 
ment in  this  State  increased  from  something  over  five  millions  to 
slightly  over  eight  millions.  The  per  capita  cost  ten  years  ago  was 
$1.91,  and  now  it  is  $2.92.  This  increase  of  sixty-one  per  cent  in 
the  total  is  considerably  less  than  the  average  increase  for  the  forty- 
eight  States,  which  was  $1.05.  The  per  capita  increase  was  fifty- 
three  per  cent  compared  to  the  seventy-two,  taking  the  forty-eight 
States,  and  compared  to  fourteen  per  cent,  the  increase  for  the  na- 
tional government.  ^  So  that,  whereas  I  have  heard  some  remarks 
here  during  the  day  concerning  the  increase  in  the  cost  of  govern- 
ment in  this  State,  you  will  see  that  although  it  has  been  consider- 
able it  has  been  very  much  less  than  the  increase  when  the  forty- 
eight  States  as  a  whole  have  been  considered,  very  much  less  indeed. 

MB.  JONES  :     Which  State  has  the  highest  cost  ? 

PROFESSOR  COULTER:  Some  of  the  Western  States  which  are 
very  sparsely  populated.  Nevada  has  a  per  capita  tax  of  five  times 
what  you  have  in  this  State,  showing  the  overhead  charges  in  start- 
ing business. 

MR.  JONES:     How  about  Oregon? 

PROFESSOR  COULTER  :  I  do  not  remember  now  what  it  is,  but 
some  of  them  are  surprisingly  low,  and  there  is  a  great  deal  of  vari- 
ation ;  but  in  every  State  the  movement  is  distinctly  upward. 

The  question  immediately  comes  to  your  mind — it  came  to  my 
mind  very  strongly — what  is  all  this  money  used  for?  And  is  this 


48  INDIANA    UNIVERSITY 

increase  in  the  cost  of  conducting"  the  State  government  due  to  new 
enterprises  on  the  part  of  the  State,  or  is  it  because  of  an  increase 
in  the  cost  of  old  enterprises,  old  activities?  And  I  jotted  down 
here  a  few  of  the  general  summaries,  so  that  you  might  hear  a  few 
of  the  conclusions,  in  the  hope  that  this  would  merely  whet  your 
appetite,  and  you  might  be  inclined  to  study  the  thing  carefully 
from  an  inspection  of  the  report. 

Taking  the  situation  ten  years  ago  to  the  present  time  for  the 
forty-eight  States,  the  cost  of  the  general  government,  the  general 
legislative,  executive,  and  various  departments,  the  per  capita  cost 
ten  years  ago  was  thirty-two  cents.  Now  it  is  forty-two  cents,  an 
increase  of  ten  cents  per  capita. 

MR.  JONES  :     Is  that  city  and  State  government  as  well  ? 

PROFESSOR  COULTER  :  No,  sir  this  is  just  the  forty-eight  States. 
I  first  referred  to  the  national  government,  and  then  to  the  forty-^ 
eight  States.  In  a  minute  I  will  refer  to  the  cities  and  counties. 

The  general  government  ten  years  ago  cost  thirty-two  cents  per 
capita;  now  forty-two  cents.  Protection  to  person  and  property, 
eight  cents  ten  years  ago;  now  twenty-six  cents.  Health  and  san- 
itation, seven  cents  ten  years  ago ;  seven  cents  today.  Highways, 
six  cents  ten  years  ago ;  fourteen  cents  now.  Charities,  including 
hospitals,  sixty-five  cents  ten  years  ago ;  ninety  cents  now.  Educa- 
tion, eighty  cents  ten  years  ago ;  now  one  hundred  and  thirty-eight 
cents,  an  increase  of  fifty-eight  cents.  Public  service  enterprises  of 
various  kinds,  four  cents  ten  years  ago ;  four  cents  now.  Interest 
on  the  State  debts  of  various  kinds  cost  twelve  cents  per  capita  ten 
years  ago ;  fifteen  cents  now.  Outlays,  new  enterprises,  three  cents 
ten  years  ago ;  fifty  cents  now. 

A  particularly  noticeable  thing  in  comparing  those  ten  of  fifteen 
items,  merely  in  order  to  show  the  general  movement,  is  that  in 
practically  every  department,  in  every  branch  of  the  government, 
in  every  line  of  activity,  the  increase  has  been  more  than  in  propor- 
tion to  the  increased  population.  In  other  words,  the  per  capita 
cost  has  increased. 

In  the  few  minutes  that  I  have  I  cannot  go  into  any  detail  in 
any  of  these  branches,  but  I  wish  before;  closing  to  give  you  a  IV  w 
facts  relative  to  the  condition  in  the  cost  of  conducting  city  govern- 
ment. I  referred  to  the  cost  of  conducting  the  national  govern- 
ment and  the  forty-eight  State  governments.  This  investigation 
which  is  now  in  progress  has  taken  up  the  cost,  of  conducting  the 


TAXATION    IN    INDIANA  49 

municipal  governments  of  the  municipalities  of  the  country,  the 
cities.  I  do  not  have  before  me  the  final  results  for  all  the  cities. 
The  reports  are  now  going  to  press  for  cities  as  small  as  twenty-five 
hundred  in  size.  It  will  be  sufficient  to  show  the  tendency,  1hc, 
movement  over  the  ten-year  period,  to  take  the  facts  for  the  largest 
one  hundred  and  forty  cities,  because  they  show  the  definite  ten- 
dency of  the  movement  in  the  country  as  a  whole.  The  statistics 
which  I  have  before  me  are  for  one  hundred  and  forty-six  of  the 
largest  cities  in  the  United  States,  cities  of  over  thirty  thousand,  ten 
years  ago  and  at  the  present  time.  Remember  that  the  bulletin 
which  is  now  on  the  press  will  carry  these  same  facts  as  to  all  cities 
as  low  as  twenty-five  hundred. 

In  1902  and  1903  the  net  governmental  cost  payments  of  these 
cities  amounted  to  about  $463,000,000.  Ten  years  later — this  last 
report  shows  for  the  same  cities — $907,000,000,  an  increase  of  nine- 
ty-six per  cent,  as  compared  with  an  increase  of  one  hundred  and 
five  per  cent  for  the  forty-eight  States.  Of  course,  here  again  we 
have  the  increase  in  the  population  of  the  cities. 

The  per  capita  cost  of  conducting  city  governments  in  these 
cities  ten  years  ago  was  $22.71 ;  the  per  capita  cost  at  the  present 
time,  $33.08 ;  an  increase  of  over  forty-five  per  cent  or  nearly  forty- 
six  per  cent  increase  in  the  per  capita  cost.  This  again  you  may 
compare  with  the  increase  of  seventy-two  per  cent  per  capita  for  the 
forty-eight  States,  and  the  fourteen  or  fifteen  per  cent  in  the  case 
of  the  national  government. 

MR.  HERMAN  MONK  (of  Indianapolis)  :  Do  you  have  Indian- 
apolis there,  Mr.  Coulter? 

PROFESSOR  COULTER:  Yes,  sir,  Indianapolis  is  in  this  report 
which  we  have  here,  in  great  detail,  and  how  the  money  was  ex- 
pended. How  much  went  to  the  various  departments  over  a  period 
of  ten  years  is  shown  in  great  detail.  It  shows  how  much  went  for 
education,  for  the  protection  of  person  and  property,  general  gov- 
ernment, interest  and  all  the  various  items;  and  I  want  to  empha- 
size again  that  these  figures  I  have  been  quoting  are  net  govern- 
mental cost  payments.  They  do  not  include  the  various  transfers, 
bookkeeping  accounts,  and  so  forth.  All  these  are  eliminated,  so 
that  it  is  the  actual  cost  of  conducting  the  government. 

MR,  JONES:  Professor  Coulter,  will  you  answer  this  question? 
Does  that  embrace  all  special  assessments,  such  as  street  and  sewer 
assessments,  that  are  charged  upon  the  property? 

4-2902 


50  INDIANA   UNIVERSITY 

PROFESSOR  COULTER:  Yes,  it  includes  all  of  the  taxes  on  one 
side,  and  shows  the  result. 

MB.  JONES  :  Does  it  include  assessments  paid  by  the  owners  of 
abutting  property? 

PROFESSOR  COULTER:  Yes,  sir.  If  there  is  an  independent 
school  district  it  includes  that,  or  an  independent  fire  district,  or  an 
independent  park  district.  Otherwise,  it  would  be  impossible  to 
compare  the  different  cities  where  different  practices  are  found. 

That  is  one  of  the  greatest  difficulties  arising  in  comparing  one 
city  with  another,  or  in  comparing  one  State  with  another. 

MR.  JONES  :  A  city  is  improved  by  improving  its»  streets,  mak- 
ing large  expenditures  that  are  charged  upon  abutting  property ; 
is  that  a  charge  to  city  expense  ? 

PROFESSOR  COULTER:  Yes,  sir,  it  must  necessarily  be,  if  the 
next  city  raises  it  by  a  general  property  tax,  or  in  any  other  way, 
and  you  try  to  compare  the  result  in  the  two  cities. 

In  making  a  study  of  this  kind  the  most  difficult  task  is  to  get 
comparable  facts.  One  State,  according  to  the  reports  of  the  State, 
as  generally  understood,  may  not  spend  anything  as  a  State  for 
education.  Under  another  item,  under  an  apportionment,  you  may 
find  very  large  apportionments  for  various  purposes,  and  one  of 
the  items  of  apportionment  will  be  education.  It  amounts  to  eighty- 
five  cents  per  capita  for  every  person  in  the  United  States. 

One  of  the  tasks  in  connection  with  these  reports  was  to  work 
out  a  standard  set  of  definitions  or  methods  of  procedure  which 
would  hold  as  nearly  as  possible  for  not  only  the  forty-eight  States 
and  the  three  thousand  counties,  but  for  all  incorporated  cities, 
towns,  villages,  and  boroughs,  so  that  the  classification  could  be 
carried  through  all  the  different  units,  so  that  complete  tabulations 
might  be  made  and  the  different  units  might  be  all  compared  in- 
telligently. 

MR.  JONES  :  Why  do  you  exclude  the  expense  of  bookkeeping 
or  clerks? 

PROFESSOR  COULTER  :  I  do  not  exclude  the  expense  of  bookkeep- 
ing or  clerks.  I  exclude  only  bookkeeping  accounts,  where  funds 
are  transferred  from  one  department  to  another.  It  may  be  an  ex- 
pense to  one  department  and  a  credit  to  another;  but  so  far  as  the 
cost  to  the  city  is  concerned  it  is  merely  a  transfer  of  accounts. 


TAXATION   IN   INDIANA  51 

• 

I  may  say  here,  in  passing,  that  all  these  definitions  and  methods 
of  procedure  are  described  in  detail  in  the  reports,  so  that  any  one 
who  is  really  interested  in  the  cost  of  government,  in  the  sources 
of  revenue,  in  what  becomes  of  the  money,  the  relative  position  of 
the  township,  the  county,  the  city,  the  State,  and  the  nation,  what 
becomes  of  this  vast  sum,  this  three  billion  dollars  each  year  in  the 
United  States,  may  secure  the  most  complete  presentation  of  the 
facts  which  probably  has  ever  been  gotten  together  from  this  series 
of  reports  which  is  the  result  of  an  investigation  extending  over 
about  eleven  months.  The  reports  are  now  largely  available,  the 
last  of  them  being  on  the  press. 

MR.  DAN  M.  LINK  :  Mr.  Coulter,  you  have  spoken  of  the  actual 
comparison  of  revenue  between  1900  and  1912.  What  investiga- 
tion have  you  made  as  to  the  relative  increase  or  decrease  of  govern- 
mental expenditures,  considering  the  purchasing  power  of  the  dol- 
lar in  1900  compared  with  1912? 

PROFESSOR  COULTER:  The  office  has  very  carefully  considered 
the  fact  that  a  dollar  is  not  a  dollar  now  if  it  was  a  dollar  ten 
years  ago ;  but  in  this  report  no  attempt  is  being  made  to  convert 
the  cost  of  government  today  into  the  terms  of  ten  years  ago,  or  the 
cost  of  government  ten  years  ago  into  the  terms  of  today.  That 
will  be  left  for  the  individual  who  examines  the  report  to  read  it  in 
the  terms  of  what  a  dollar  meant  ten  years  ago  and  what  it  means 
today.  I  personally  am  very  much  in  favor  of  making  the  conver- 
sion. 1  think  I  could  do  it  very  easily  myself.  Tables  have  been 
prepared  showing  us  pretty  clearly  the  relative  value  of  a  dollar  ten 
years  ago  and  today;  but  this  government  office. was  unwilling  to 
undertake  that  task  at  the  present  time  because  it  was  particularly 
anxious  to  make  a  record  over  the  record  of  ten  years  ago  when  it 
took  five  years  to  get  up  the  report  and  made  it  history,  while  in 
this  case  they  will  be  less  than  a  year  in  completing  the  entire  in- 
vestigation. 

MR.  LINK  :  In  presenting  these  tables  have  you  anything  in 
mind  in  regard  to  the  values  of  today  and  ten  years  ago  ? 

PROFESSOR  COULTER  :  I  do  not  believe  I  have,  offhand.  I  am  so 
used  to  using  exact  figures  that  I  seldom  guess,  but  a  number  of  dif- 
ferent statistical  experts  in  the  country  have  worked  up  balance 
tables,  and  the  information  can  be  very  well  supplied  by  various 
people  in  your  own  State  and  other  States, 


52  INDIANA   UNIVERSITY 

MR.  LINK  :  Have  you  any  conclusion  to  give  as  to  the  relative 
increase  or  decrease  between  this  period  and  the  period  you  speak 
of  ten  years  ago?  I  believe  I  heard  you  discuss  this  once  before, 
You  have  some  idea  about  it.  I  would  like  to  have  your  idea  as  to 
whether  there  has  been  a  relative  increase  in  the  cost  of  government. 
There  has  been  an  actual  increase  in  the  figures  you  have  given,  but 
has  there  been  a  relative  increase? 

PROFESSOR  COULTER:  Oh,  there  has  no  doubt  been  a  relative 
increase  in  the  cost  of  government.  The  per  capita  increase  in  the 
national  government  of  fourteen  per  cent  and  of  seventy-two  per- 
cent for  the  States  -and  forty-six  for  the  cities,  and  so  on  down, 
represents  an  actual  increase  also ;  but  it  is  my  personal  belief  that 
it  is  not  only  a  justifiable  increase  but  a  useful  increase,  and  that 
probably  we  are  getting  more  service  for  the  same  amount  of  money 
,spent  now  than  we  were  ten  years  ago.  The  increase  in  expense  is 
due  to  the  expression,  of  the  will  of  the  people  that  the  government 
can  do  many  things  for  the  community  better  than  they  can  be 
done  if  left  to  individuals.  Those  of  you  who  are  students  of  his- 
tory as  well  as  taxation,  the  practical  question  of  taxation  problems, 
may  recollect  that  one  hundred  and  fifty  years  ago  a  great  states- 
man of  a  great  country  said  if  a  man  had  a  boat  and  was  in  com- 
merce and  was  afraid  that  his  boat  might  run  on  the  rocks  some 
time  in  a  storm,  the  thing  for  him  to  do  was  to  build  a  lighthouse. 
Well,  we  know  today  that  the  nations  build  the  lighthouses,  and  that 
individuals,  the  owners  of  vessels,  don't  need  fear  running  on  the 
rocks.  Those  who  will  look  back  a  hundred  years  or  more  ago 
know  that  they  said  that  if  you  have  a  child  and  haven't  sense 
enough  or  time  or  inclination  to  teach  that  child  yourself,  the  thing 
for  you  to  do  is  to  go  hire  somebody  to  teach  him.  "We  know  today 
that  the  State — and  by  the  State  I  mean  the  forty-eight  States — 
the  cities,  counties,  and  local  communities  have  taken  over  that  job, 
and  are  doing  it  much  better,  much  more  uniformly,  much  more 
efficiently  than  it  was  ever  done  before;  and  without  going  into 
details  at  all,  it  seems  to  me  that  the  total  increase  represents  in- 
crease in  service.  It  seems  to  me,  from  the  most  careful  study  that 
I  have  been  able  to  make,  that  we  are  getting  more  service  out  of 
every  dollar  expended  now  than  we  were  out  of  every  dollar  ex- 
pended even  ten  years  ago.  I  think  it  is  a  healthy  situation  that  we 
find  ourselves  in.  On  the  other  hand,  I  think  it  is  well  for  us  to 
know  the  facts,  understand  the  facts,  and  study  them  very  care- 
fully, comparatively,  before  we  jump  on  to  a  change  in  the  system 
in  any  way. 


TAXATION  IN  INDIANA  53 

SUMMARY  OF  THE  FIRST  SESSION 

DR.  THOMAS  F.  MORAN,  Professor  of  History  and  Political  Economy  in 
Purdue  University 

In  attempting  to  sum  up,  even  very  casually,  this  series  of  most 
excellent  papers  I  feel  that  I  am  undertaking  a  very  great  task.  At 
a  missionary  meeting  I  was  once  asked  to  sum  up  the  history  of  the 
world  in  fifteen  minutes.  I  experience  a  similar  impression  on  this 
occasion. 

I  would  like  to  make  some  running  comments  here  and  there  on 
the  subjects  presented  so  well  and  so  lucidly,  and  leave  the  more  de- 
tailed parts  of  the  discussion  to  those  who  are  to  follow. 

I  think  the  keywords  of  our  present-day  civilization  are  con- 
servation and  efficiency.  We  hear  them  on  every  side.  We  are  at- 
tempting to  conserve  our  resources,  and  attempting  to  introduce 
greater  efficiency  and  greater  economy  into  our  business  methods 
and  forms  of  government. 

We  Americans  are  accustomed  to  brag  about  what  we  have  ac- 
complished in  an  industrial  way.  Personally,  I  don't  think  we 
have  done  wonders.  We  have  inherited  a  great  rich  country,  and 
we  have  been  reaping  for  generations  where  we  didn't  sow.  We 
have  been  robbing  the  soil  of  its  chemical  elements.  We  have  been 
robbing  the  earth  and  making  no  return;  and  now  the  time  of  ac- 
counting is  at  hand.  It  is  necessary  for  us  to  introduce  an  inten- 
sive instead  of  an  extensive  system  of  agriculture.  It  is  necessary 
for  us  to  take  account  of  our  resources  and  husband  them. 

In  the  same  way  we  have  carried  on  our  public  finances,  in  a 
rather  wholesale  and  not  very  scientific  manner.  We  have  had 
money  enough  to  meet  the  expenses  of  the  government,  but  now  as 
these  expenses  mount  higher  and  higher  with  each  year  and  each 
decade,  we  are  asking  ourselves  how  can  we  have  a  more  economical 
and  more  efficient  government?  Those  two  words,  it  seems  to  me, 
are  the  words  which  must  of  necessity  command  our  attention  at 
the  present  time. 

Governor  Ralston  was  undoubtedly  correct  when  he  said  in  his 
opening  address  that  taxes  will  probably  never  be  lower  than  they 
are  at  the  present  time.  The  curve  is  ascending  gradually,  in  some 
periods  rather  more  rapidly  than  in  others,  but  it  is  not  descending ; 
and  on  the  whole  it  is  not  very  likely  to  do  so.  We  are  increasing 
in  population,  our  necessities  are  greater,  and  the  people  are  con- 
stantly demanding  that  the  government  shall  do  more  and  more 
things ;  and  I  think  that  Dr,  Coulter  is  undoubtedly  correct  when 


54  INDIANA   UNIVERSITY 

he  said  we  are  probably  getting  more  for  the  money  that  we  are 
putting  into  our  governmental  business  today  than  ever  before, 
But  the  simple  fact  is  that  our  expenditures  are  increasing,  and  in 
some  instances  rather  alarmingly  so,  and  it  is  necessary  for  us  to 
ask  now  how  can  we  produce  greater  economy  and  efficiency  in  our 
governmental  methods — not  the  penny-wise  and  pound-foolish  econ- 
omy, but  the  real  economy  to  which  the  Governor  referred  in  his 
opening  address. 

One  of  the  speakers  this  morning  mentioned  the  fact  that  gov- 
ernment costs  too  much.  I  think  that  is  true.  While  we  are  get- 
ting a  great  return  for  what  we  are  putting  into  the  government, 
we  are  not  getting  as  much  for  it  as  we  ought  to,  because  it  is  a  well- 
known  fact  that  a  dollar  of  public  money  does  not,  in  these  days, 
go  as  far  as  a  dollar  of  private  money  administered  by  a  capable 
and  business-like  citizen.  Then  what  should  be  the  trend  of  our 
discussion  and  our  development  ?  It  is  to  make  the  dollar  of  public 
money  just  as  efficient  as  the  dollar  of  private  money.  But  the 
people  somehow  look  upon  the  taxes  gathered  in  the  treasury  as 
having  come  there  by  some  sort  of  magic,  and  they  seem  to  be  will- 
ing to  make  raids  upon  the  treasury  for  all  conceivable  purposes. 
Of  course,  no  great  economy  can  be  obtained  in  this  way. 

I  was  interested  very  greatly  in  Professor  Rawles'  paper  upon 
the  theories  of  taxation.  Those  theories,  I  was  about  to  say  com- 
monly accepted — they  are  not  all  of  them  commonly  accepted — but 
those  theories  of  taxation  are  interesting  as  guides  for  our  practical 
operations.  We  all  know  very  well,  however,  that  it  frequently 
happens  that  what  is  good  in  theory  does  not  always  work  out  very 
well  in  practice ;  and  so  it  is  necessary  for  us  to  bring  together  in  a 
convention  of  this  kind  men  who  have  had  to  do  with  the  practical 
as  well  as  the  theoretical  side. 

We  have  had  some  very  refreshing  discussions  here  from  men 
right  out  of  the  trenches,  men  who  have  been  attempting  to  do  these 
things,  and  who  have  told  us  about  the  difficulties  which  they  en- 
counter ;  but  in  the  course  of  his  opening  address  Dr.  Rawles  put  his 
finger  upon  the  spot  where  the  Indiana  property  tax  system  breaks 
down ;  and  that  has  been  emphasized  by  Mr.  Bowman,  by  Mr.  Will- 
iams, and  by  one  or  two  other  speakers  on  this  program. 

I  want  to  call  your  attention  to  the  fact  that  our  taxing  system 
in  Indiana  has  not  worked  well  in  recent  years,  and  for  reasons  that 
have  been  set  forth.  Something  ought  to  be  done  to  bring  about  a 
better  and  more  business-like  state  of  affairs.  One  point  which  Pr, 


TAXATION   IN   INDIANA  55 

Rawles  mentioned  I  would  like  to  emphasize  briefly,  namely,  that 
we  should  have  in  this  State,  if  we  are  going  to  continue  the  proper- 
ty tax — and  I  think  there  is  no  doubt  about  that — a  classification  of 
property  such  as  obtains  in  many  of  the  other  forty-eight  States. 
There  is  no  good  reason  why  a  dining-room  chair  should  be  taxed 
at  the  same  rate  as  a  mine,  a  farm,  or  a  factory.  There  should  be 
a  difference  between  the  productive  and  the  non-productive  proper- 
ty for  purposes  of  taxation. 

I  was  very  sorry  that  Mr.  O'Brien  was  not  here,1  for  the  matter 
of  State  finance  is  an  exceedingly  important  one,  and  Mr.  0  'Brien 
lias  just  finished  an  official  term  in  which  he  has  had  a  great  deal 
to  do  with  the  actual  financial  machinery  in  this  State.  Undoubt- 
edly the  next  few  years  will  see  very  marked  changes  in  the  financial 
machinery  of  the  various  States.  We  have  in  Illinois^  in  Minnesota, 
in  Iowa,  and  in  several  other  States,  commissions  that  are  study- 
ing these  very  problems — commissions  appointed  by  the  legislature 
or  the  governor  for  the  purpose  of  making  an  administrative  survey 
of  the  State,  preliminary  to  the  introducing  of  uniform  methods. 
Many  of  our  States  have  gone  on  now  for  a  hundred  years,  and  some 
of  them  more,  without  any  marked  changes  in  their  fiscal  policy; 
and  in  a  great  many  respects  we  have  outgrown  the  garments  of 
our  earlier  days. 

I  was  interested  also  in  Mr.  Dunn's  paper  in  regard  to  the 
finances  of  the  city  of  Indianapolis.  On  thing  that  struck  me  forci- 
bly about  that  paper  is  this — its  discriminating  and  analytical 
character.  We  have  in  these  days  rather  too  much  of  general  state- 
ment. It  is  necessary  for  the  close  student  of  finance  and  politics 
to  get  behind  figures  and  analyze  them,  and  see  what  they  really 
mean,  because  upon  the  face  of  those  figures  a  certain  impression 
may  be  given,  while  behind  them  there  is  an  entirely  different 
meaning. 

And  then  Mr.  Dunn*  incidentally  referred  to  the  two  per  cent 
constitutional  limitation,  and  said  that  in  effect  it  was  a  one  per 
cent  limitation.  We  are  going  to  hear  a  great  deal  about  that  now 
and  in  the  years  that  are  to  come.  Our  cities  are,  to  a  certain  ex- 
tent, chafing  under  that  two  per  cent,  or  one  per  cent  limitation,  as 
we  may  see  fit  to  call  it.  There  will  be  demands  here  and  there  for 
an  extension  of  that  limitation  in  order  to  permit  cities  to  enter 
into  such  enterprises  as  Anderson  and  other  cities  have  entered  into. 
That  demand,  of  course,  will  give  rise  to  a  demand  for  greater 

>  Mr.  O'Brien's  paper,  which  was  not  read  at  the  association,  is  included  in  this  publication. 


56  INDIANA   UNIVERSITY 

revenue,  and  the  demand  for  greater  revenue  will  give  rise  to  a 
change  in  the  restriction. 

I  believe  heartily  in  a  larger  measure  of  home  rule  for  cities.  I 
believe  that  when  cities  reach  a  certain  size  they  are  in  a  degree  able 
to  manage  their  own  affairs,  and  should  have,  to  a  very  large  extent, 
home  rule  with  regard  to  that  management;  but  I  think  the  State 
of  Indiana  would  make  a  very  great  mistake  in  allowing  the  pendu- 
lum to  swing  from  one  extreme  clear  over  to  the  other.  I  think 
that  there  should  be  some  restriction  placed  upon  public  expendi- 
ture, placed  upon  the  debt-creating  power,  because  if  we  are  going 
to  remove  all  restriction  upon  municipal  indebtedness  our  municipal 
Ixmds  and  other  securities  will  probably  not  have  the  solid  market 
value  which  they  have  at  the  present  time. 

One  of  the  speakers  mentioned  the  fact  that  our  inequitable  sys- 
tem of  taxation  leads  rich  men  to  evade  the  payment  of  their  taxes 
and  to  sequester  their  property.  I  think  that  the  system  is  one  of 
the  reasons,  but  it  is  not  the  only  one.  In  the  first  place,  wealthy 
men  are  not  the  only  ones  who  evade  taxes,  and  our  inequitable  sys- 
tem is  only  one  of  many  reasons  why  men  do  so.  If  we  had  in  the 
State  of  Indiana  a  tax  system  devised,  by  the  blind  Goddess  Justice 
and  administered  by  the  Angel  Gabriel  there  would  be  many  men, 
both  rich  and  poor,  who  would  attempt  to  evade  their  obligation. 
We  cannot  put  down  any  one  reason  for  the  evasion  of  taxes.  It 
is  human  nature,  and  there  is  a  great  deal  of  human  nature  in  most 
people. 

I  was  very  much  interested  in  Mr.  Williams'  fresh,  crisp,  and 
outspoken  discussion  on  the  subject  of  municipal  finances.  I  think 
perhaps  his  main  thesis  is  correct.  I  should  say,  however,  that 
there  were  two  main  theses  to  the  paper. 

The  first  is  that  municipal  governments  are  suffering  a  great 
deal  from  political  misrule.  Undoubtedly  municipal  government 
has  been  made  the  football  of  politics  in  a  great  many  ways,  and  in 
so  far  as  the  commission  form  of  city  government,  or  the  Ohio  plan 
of  the  city  manager,  can  introduce  business  methods  in  place  of 
politics,  I  think  we  are  all  for  it.  But  let  us  bear  in  mind,  how- 
ever, that  there  is  a  possibility  of  blaming  the  politician  overmuch 
in  this  respect.  The  politician  has  carried  on  our  city  government. 
Many  other  good  people  don't  find  time  to  go  to  the  primaries. 
Some  of  them  don't  even  find  time  to  vote,  and  if  governmental 
activities  depended  upon  them  the  probability  is  that  we  should 
have  no  city  government  at  all.  I  am  heartily  in  favor  of  any  sys- 


TAXATION   IN   INDIANA  57 

tern,  be  it  the  commission  form  of  government  or  the  city  manager 
system,  which  will  put  our  municipal  government  upon  a  business 
basis  rather  than  upon  a  political  basis. 

The  second  main  thesis  in  the  paper  is  the  municipal  owner- 
ship of  public  utilities.  There  I  think  there  would  be  a  wide 
difference  of  opinion.  The  city  of  Anderson  has  apparently 
done  many  things  well,  but  I  think  that  you  and  I  could  pick  out 
cities  in  this  State  where  the  same  degree  of  success  would  not  be 
achieved  in  the  same  way  under  present  conditions.  The  success 
of  a  venture  of  that  kind  needs  of  course  a  set  of  favorable  condi- 
tions, and  those  conditions  do  not  exist  in  every  city  in  this  State. 
I  do,  however,  think  this  is  true,  that  as  we  progress  in  our  muni- 
cipal government  the  people  are  going  to  demand  more  and  more 
from  their  government  in  the  way  of  public  utilities;  and  we  might 
just  as  well  be  prepared  for  that  in  the  future.  The  tendency  of 
the  times  is  unmistakably  in  that  direction. 

I  don't  know  that  I  ever  heard  a  more  clean-cut,  satisfactory, 
and  concise  statement  of  a  case  than  that  which  Mr.  Bowman  gave 
us  in  his  paper  on  county  finances.  It  was  satisfactory  in  every 
respect,  though  not  attempting  to  solve  the  problem.  "We  hope  to 
have  some  light  thrown  upon  that  question  in  a  subsequent  session ; 
but  he  stated  the  case  most  admirably,  and  that  of  course  is  a  very 
great  contribution  to  such  a  meeting  as  this. 

Incidentally,  I  would  say  I  have  often  thought,  often  wondered 
why  it  was  that  so  little  attention  was  paid  to  the  delinquent  tax- 
list.  You  have  read  that  list  in  your  own  cities  and  towns,  and  you 
have  seen  there  the  names  of  men  whose  names  need  not  be  there. 
They  were  there  from  choice — because  it  was  cheaper  to  be  there 
than  to  be  elsewhere — and  I  have  often  wondered  how  any  private 
business  could  continue  to  exist  and  prosper  with  such  a  great 
leakage  as  this. 

Mr.  Berry  has  given  us  a  very  interesting  word  from  the 
trenches,  a  word  from  a  man  who  is  actually  doing  things  under 
very  great  handicaps.  I  think  undoubtedly  he  is  right  in  saying 
that  we  cannot  get  better  results  without  paying  for  them.  We 
cannot  get  all  the  cardinal  virtues  for  two  dollars  a  day.  But  I  do 
not  believe  that  high  salaries  alone  will  bring  about  a  satisfactory 
state  of  affairs  in  this  connection.  If  we  want  expert  service  of 
course  we  must  pay  for  it.  That  is  axiomatic.  But  in  addition  to 
expert  service  we  want  uniform  and  equitable  service,  not  only 
throughout  the  several  counties  and  townships,  but  throughout  the 


58  INDIANA   UNIVEKSITY 

entire  State.  Apparently  in  Wayne  county  some  admirable  things 
have  been  done.  It  is  said  that  the  amount  of  assessable  property 
has  been  largely  increased;  but  the  taxpayers  of  Wayne  county 
would  have  a  right  to  complain  if  that  same  method  were  not  ex- 
tended to  other  counties  in  the  State,  because  the  whole  thing  is 
not  equitable  unless  it  is  so  extended.  What  we  want  is  not  only 
expert  work  along  the  line  of  assessment  and  classification  of  prop- 
erty, but  we  want  State-wide  uniformity  as  well  as  county  and 
township  uniformity. 

I  was  also  very  much  interested  in  the  word  which  Dr.  Coulter 
had  to  bring.  I  do  not  wish  to  detain  you  longer,  but  I  will  say 
just  this  word.  If  we  are  going  to  make  any  great  amount  of  prog- 
ress in  our  study  of  taxation  in  Indiana  we  must  do  it  in  a  co- 
operative and  comparative  way.  If  other  States  have  made  ex- 
periments why  should  we  not  have  the  advantage  of  them  ?  If  they 
have  failed  let  us  avoid  their  failures.  If  they  have  succeeded  let 
us  avail  ourselves  of  their  successes.  I  see  we  are  to  have  at  a  sub- 
sequent meeting  a  statement  of  what  has  been  done  and  what  is 
being  done  in  other  States.  We  have  had  this  afternoon  a  state- 
ment from  the  national  government  with  regard  to  the  comparative 
costs  all  over  the  United  States.  I  might  say  that  the  report  re- 
ferred to  by  Dr.  Coulter  may  be  had  by  simply  dropping  a  card  to 
the  United  States  Census  Bureau. 

We  Americans  are  an  eager  and  nervous  race.  We  like  to 
achieve  rapid  results.  When  we  begin  to  chop  we  like  to  see  the 
chips  fly;  but  in  this  matter  of  taxation  we  must,  in  large  degree, 
possess  our  souls  in  patience.  We  cannot  afford  to  become  dis- 
couraged or  allow  the  pendulum  to  swing  from  one  extremity  of  the 
arc  to  the  other.  The  thing  to  do  is  to  do  what  this  Association  has 
so  well  begun — make  a  careful  survey  of  the  entire  field,  see  what  is 
being  done  in  other  States,  and  then  work  out  a  quiet,  evolutions  i-y 
reform  in  our  present  methods.  We  have  been  going  on  now  for 
a  hundred  years  under  a  system,  It  would  be  suicidal  to  throw 
that  aside  rashly  and  introduce  radical  changes  all  at  once.  Un- 
doubtedly our  system  is  not  ideal,  but  it  seems  to  me  that  the  proper 
thing  for  us  to  do  is  to  make  a  survey  of  the  entire  field  and  intro- 
duce our  changes  gradually  and  slowly. 


III.    EFFECT  OF  HIGH  TAX-RATES 


TAX-RATES  IN  INDIANA  AND  THEIR  TENDENCY 
EBEN  H.  WOLCOTT,  State  Tax  Commissioner 

The  question  of  taxation  in  all  of  its  phases  is  always  of  vital 
interest,  as  it  concerns  practically  all  the  people  who  contribute 
to  the  tax  fund,  and  affects  directly  or  indirectly  all  the  people 
in  the  expenditure  of  the  money  so  secured. 

The  raising  of  money  by  taxation  is  one  question,  and  the 
expenditure  of  this  money,  the  people's  money,  is  another  equally 
important,  and  one  which  should  command  more  of  the  attention 
and  consideration  of  those  concerned  than  they  now  give  to  these 
questions. 

My  discussion  of  tax-rates  and  their  tendency  in  Indiana  will 
consist  largely  of  a  recital  of  conditions  as  presented  to  us  by 
various  reports  and  information  at  our  disposal.  There  is  no 
questioning  the  fact  that  the  tendency  of  tax-rates  is  upward  and 
is  steadily  and  continuously  moving  toward  a  higher  plane.  There 
are,  of  course,  many  reasons  why  the  amount  of  money  expended 
throughout  the  State  should  be  greater  each  succeeding  year,  and 
the  consequent  result  that  more  money  has  to  be  raised  by  taxation. 
But  theoretically  if  all  property  values  increase  proportionately 
in  growth  and  development  to  meet  demands,  then  rates  should 
not  be  higher.  But  rates  are  not  only  higher,  but  valuations  are 
higher,  and  for  this  apparent  inconsistency  there  should  be  some 
explanation.  I  note  by  the  program  that  the  effect  of  high  taxes 
upon  different  classes  of  property  is  to  be  discussed  by  able  and 
distinguished  men  this  afternoon,  so  that  much  will  undoubtedly 
be  made  clear  that  is  now  confusing.  We  have  apparently  got 
out  of  step,  as  the  higher  the  rates  go  the  more  property  is 
hidden  or  undervalued,  thus  decreasing  the  amount  of  taxables; 
and  the  more  property  is  hidden  and  undervalued,  the  higher 
rates  must  be  in  order  to  secure  the  amount  of  revenue  needed. 
It  seems-  that  some  radical  action  must  be  taken  to  get  in  line. 

We  in  Indiana  have  the  general  property  tax,  and  under  this 
law,  all  property  is  to  be  assessed  for  taxation  at  its  true  cash 
value.  In  so  far  as  this  applies  to  real  estate  it  is  not  done,  as 
is  too  well  known  to  discuss. 


CO  INDIANA   UNIVERSITY 

In  the  first  place,  our  method  of  valuing  or  appraising  real 
estate  every  four  years  would  make  this  an  impossibility.  Even 
if  it  were  assessed  at  full  value  during  the  year  of  appraisal, 
before  the  four  years  had  passed  wide  and  violent  fluctuations 
would  have  occurred  between  the  different  sections,  so  as  to  destroy 
entirely  the  equality  of  the  original  assessment.  I  need  only 
recite  the  mushroom  growth  of  Gary  or  the  great  advance  in  the 
value  of  farm  lands  as  an  example  of  rapid  increase  of  valuations ; 
or,  on  the  other  hand,  the  change  of  sentiment  in  our  own  city 
where  many  pieces  of  property  are  valued  for  taxation  at  a 
larger  price  than  could  be  realized  for  them  at  a  cash  sale,  and 
the  shrinkage  in  value  in  certain  parts  of  the  State  where  natural 
gas  has  failed  and  many  factories  and  homes  have  been  abandoned. 

The  question  of  the  taxation  of  land,  and  with  it  the  improve- 
ments, has  been  a  vital  and  dominant  question  for  discussion  for 
ages.  Prof.  Seligman  in  his  Essays  on  Taxation  begins  with  an 
essay  on  The  Development  of  Taxation.  It  is  well  worth  the  study 
of  any  one  interested  in  the  subject.  As  land  and  its  products 
were  the  first  forms  of  stable  property  values,  so  everywhere,  at 
first,  the  direct  property  tax  is  found  to  be  either  the  land  tax 
or  the  tax  on  agricultural  capital. 

The  first  attempt  to  tax  the  individual  was  rather  to  take  a 
part  of  his  produce,  a  tithing,  as  land  in  this  early  day  was  not 
in  a  sense  private  property,  this  produce  being  a  very  fair  test 
of  his  ability  to  pay,  a  sort  of  income  tax.  As  the  communal 
system  broke  down,  owing  to  advancing  population,  the  growth  of 
private  ownership  of  land  increased.  In  the  early  Middle  Ages 
land  taxes  were  not  based  directly  on  selling  value,  because  while 
land  was  private  property,  it  was  not  bought  and  sold,  so  taxes  were 
based  on  the  productive  ability  of  the  land.  "When  the  American 
Colonies  were  formed,  private  ownership  of  land  was  well  estab- 
lished, and  the  land  tax  very  soon  became  a  tax  on  the  value  of 
land.  The  development  of  property  values  outside  of  land  neces- 
sitated some  plan  by  which  they  could  be  considered  in  a  plan 
of  taxation,  so  the  general  property  tax  was  evolved. 

I  have  very  hastily  sketched  these  advances  so  as  to  reach  our 
present  method,  which  is  the  general  property  tax.  This  method 
of  taxation  is  now  being  discarded  by  many  States  and  was  dis- 
carded as  early  as  the  latter  part  of  the  eighteenth  century  in 
parts  of  Europe  by  substituting  a  system  of  taxation  on  net  prod- 
ucts. At  the  present  time,  nineteen  States  have  constitutional 
amendments  pending  and  ten  of  these  are  for  a  classification  tax. 


TAXATION   IN   INDIANA  61 

These  amendments  are  all  for  the  purpose  of  securing  better  results 
in  the  assessment  of  personal  property,  large  values  of  which 
escape  taxation  because  it  is  easily  hidden  or  concealed. 

No  one  can  dispute  the  fact  that  all  land  is  taxed.  It  is 
permanently  fixed  in  location  and  cannot  escape.  No  one  dis- 
putes the  fact  that  the  larger  part  of  taxation  is  borne  by  lands 
and  improvements,  even  in  this  present  state  of  undervaluation. 
In  fact,  one  school  of  students  of  taxation  believe  that  land  should 
bear  all  the  burden  of  taxation.  The  single  tax  enthusiast  is 
wonderfully  positive  that  this  would  solve  all  the  existing  evils 
and  troubles  that  now  beset  the  State  in  trying  to  evolve  a  just 
and  equitable  method  of  raising  revenue.  I  will  not  try  to  dis- 
cuss his  contention.  It  is  being  tried  in  certain  provinces  of 
Canada  and  will  be  tried  soon  in  Pueblo,  Colorado.  It  has,  how- 
ever, many  more  critics  than  advocates. 

Land  is  not  only  subject  to  the  general  tax  levied  upon  all 
property,  but  also  certain  real  estate  has  special  taxes  imposed 
in  the  way  of  ditch  taxes,  street  improvement  taxes,  and  the  like. 
These,  of  course,  have  a  direct  effect  on  the  value  of  the  property 
so  taxed,  but  it  is  often  a  heavy  burden  and  receives  for  years  no 
equalizing  compensation. 

In  Indiana  the  last  Auditor's  report  shows  that  real  estate 
and  improvements  bear  about  64  per  cent  of  the  assessments  for 
taxation,  and  personal  property  of  all  kinds  36  per  cent.  Of 
this  class  of  property,  railroads,  interurbans,  express  companies, 
and  so  forth,  which  are  assessed  by  the  State  Tax  Commission, 
bear  about  14  per  cent,  leaving  all  other  classes  of  personal  prop- 
erty, live  stock,  moneys,  notes,  mortgages,  stocks  and  bonds,  mer- 
chandise, household  goods,  in  fact  everything  else  that  is  taxable, 
about  22  per  cent.  The  latest  figures  now  available  are  from  the 
Auditor's  report  of  1913,  which  is  of  the  assessment  of  1912;  the 
report  of  the  assessment  of  1913  is  now  in  the  process  of  com- 
pilation. 

Now  all  property  in  Indiana  is  subject  to  taxation,  except  that 
especially  exempted  by  law,  but  while  all  property,  except  that 
which  is  exempt,  is  to  be  assessed  alike  under  the  law,  a  comparison 
of  figures  would  indicate  that  this  is  far  from  true.  Beginning 
in  1878,  we  find  that  the  assessed  value  of  land,  not  including 
lots  or  improvements,  was  $389,839,375.  This  declined  until  in 
1889  the  valuation  was  only  $307,834,605.  In  1890  it  had  grown 
to  $308,173,414.  In  1891  the  State  Tax  Commission  was  created 
and  immediately  the  value  of  lands  was  increased  to  $450,186,112. 


62  INDIANA   UNIVERSITY 

There  was  very  little  change  from  this  on  until  1899.  Personal 
property  in  1878  was  valued  at  $198,333,157.  In  1890  this  had 
increased  to  $236,831,076,  and  in  1891,  when  the  State  Tax  Com- 
mission was  formed,  this  was  increased  to  $293,745,534.  This  also 
was  changed  but  little  up  to  1899.  In  1878  the  value  for  taxation 
of  railroads,  express  companies,  telephones,  and  similar  companies 
was  $37,759,950.  In  1890  this  had  increased  to  $66,904,967,  but 
in  1891  when  the  State  Tax  Commission  was  created,  this  advanced 
to  $162,910,181,  and  these  figures  had  declined  in  1899  to  $158,- 
848,672.  You  will  note  in  this  connection  that  from  1878  to  1890 
there  was  considerable  increase  even  by  the  old  methods  of  taxa- 
tion in  the  values  of  personal  property  of  all  kinds,  while  in  the 
land  values  there  was  a  very  marked  decrease.  This  condition 
changed  after  the  creation  of  the  State  Tax  Commission  as  will  be 
shown  from  the  following  figures : 

The  Auditor's  report  of  1899  shows  the  assessed  value  of  real 
estate  and  improvements  to  be  $857,626,756,  and  personal  proper- 
ty, not  including  railroads  and  interurbans,  for  such  are  assessed 
by  the  State  Tax  Commission,  to  be  $295,032,580,  while  railroads 
were  assessed  at  $158,848,672.  making  a  total  value  of  all  property 
for  assessment  purposes  of  $1,311,508,008.  In  1904  the  assessed 
value  of  real  estate  and  improvements  was  $982,365,545 ;  of  person- 
al property,  not  including  railroads,  $378,665,041 ;  of  railroads, 
interurbans,  $202,009,175,  or  a  total  of  $1,563,039,761,  a  gain  in  all 
values  of  $251,531,653,  of  which  real  estate  and  improvements 
showed  a  gain  of  about  $124,738,000,  and  personal  property,  not 
including  railroads,  a  gain  of  about  $83,632,000,  and  railroads,  a 
gain  of  about  $43,150,000.  In  1909,  the  report  shows  real  estate 
and  improvements  assessed  at  $1,110,391,659 ;  personal  property, 
not  including  railroads,  at  $422,280,860 ;  railroads  at  $243,459,577, 
or  a  total  of  $1,776,132,096,  a  total  gain  of  $213,102,335.  The  gain 
in  real  estate  and  improvement  values  during  this  period  was  about 
$128,026,000 ;  personal  property,  not  including  railroads,  $43,535,- 
000 ;  and  railroads,  about  $41,450,000.  You  will  note  that  the  per- 
sonal gain,  not  including  railroads,  was  only  about  one-half  that 
shown  in  the  previous  five-year  period ;  that  railroads  show  about  the 
same  gain,  while  real  estate  shows  a  gain  of  about  $3,500,000  over 
that  of  the  previous  five-year  period.  The  1913  report  shows  real 
estate  and  improvements  were  assessed  at  $1,282,323,814;  personal 
property,  not  including  railroads,  at  $416,876,113;  and  railroads 
at  $260,020,251,  or  a  total  of  $1,959,220,178,  making  a  total  gain  in 


TAXATION   IN   INDIANA  63 

all  classes  of  property  for  this  four-year  period  of  $183,125,783. 
The  gain  in  real  estate  and  improvements  for  this  period  was  $171,- 
932,165,  showing  a  large  increase  over  previous  periods.  Personal 
property,  not  including  railroads,  showed  a  loss  of  $5,404,747, 
while  railroads  and  interurbans  showed  a  gain  in  valuation  of 
$16,560,165. 

We  have  the  extraordinary  spectacle  presented  here  of  an  actual 
loss  between  the  years  1908  and  1912,  as  these  last  reports  cover 
that  period  of  assessment,  of  about  five  and  one-half  million  dollars 
in  the  valuation  of  personal  property.  These  reports  show  that 
previous  to  1890  personal  property  grew  rapidly  in  value  for  taxa- 
tion purposes  but  since  1890,  while  showing  greater  valuation,  per- 
sonal property  does  not  show  the  same  proportionate  increase  as 
other  property,  growing  less  until  in  1912  an  actual  loss  is  shown. 
What  is  the  reason?  Gravel-road  bonds  would  probably  account 
for  only  a  small  part  since  the  law  exempting  them  from  taxation 
went  into  effect  in  1911,  and  there  would  be  only  one  year  to  con- 
sider these.  Then  what  is  the  matter?  Indiana  has  not  grown 
poorer  between  the  years  1908  and  1912,  this  period  showing  an 
actual  loss  in  values  of  personal  property.  In  fact  these  were 
years  of  great  prosperity.  There  must  be  some  other  reason.  Is 
it  because  the  constantly  increasing  rates  levied,  and  the  increasing 
and  perhaps  wasteful  expenditure  of  moneys  so  raised,  has  caused 
our  whole  system  to  grow  into  ill  repute?  Something  is  certainly 
radically  wrong.  Personal  property  during  previous  periods  had 
been  showing  constant  gains,  but  in  the  last  period  of  four  years 
as  shown  by  the  reports  of  1909  to  1913  real  estate  reflects  the  in- 
creasing prosperity  of  the  country  by  showing  increased  assessed 
values  of  over  $170,000,000,  or  more  than  the  previous  period  and 
greater  than  any  previous  period  taken,  but  personal  property,  ex- 
cept railroads  and  interurbans,  shows  an  actual  loss  of  over  $5,000,- 
000.  This  loss  must  be  traced  largely  to  the  fact  that  rates  locally 
were  constantly  increasing  so  as  to  absorb  to  greater  extent  the  in- 
come from  certain  classes  of  personal  property,  and  that  the  tax- 
payers, in  an  effort  to  protect  themselves,  found  that  this  class  of 
property  was  the  one  kind  most  easily  sequestered. 

A  comparison  of  tax-rates  since  1905  with  the  growth  of  in- 
crease in  valuations  of  personal  property,  including  railroads,  inter- 
urbans, and  all  that  class  of  property  assessed  by  the  State  Tax 
Commission,  in  various  cities  in  the  State  shows  constantly  increas- 
ing rates  much  greater  than  the  increase  in  valuation,  notwith- 


64  INDIANA   UNIVERSITY 

standing  the  fact  that  from  1905  to  1913  Indiana,  its  cities,  towns, 
and  country  districts  enjoyed  greater  prosperity  than  during  any 
similar  period. 

Fort  "Wayne,  a  rapidly  growing  city,  with  an  average  tax-rate 
of  2.36  dollars  in  1905,  shows  an  increase  to  2.97  dollars  in  1913,  or 
a  gain  of  about  20  per  cent,  while  the  increase  in  personal  property 
values  of  all  kinds,  including  railroads,  was  only  about  19  per  cent 
for  this  period. 

Lafayette  shows  an  increase  in  tax-rate  from  2.40  dollars  in  1905 
to  3.13  dollars  in  1913,  or  a  gain  of  about  27  per  cent,  while  the 
valuation  for  taxation  of  all  kinds  of  personal  property  for  the 
same  period  shows  a  gain  of  only  about  10  per  cent. 

South  Bend,  one  of  the  best  manufacturing  cities  in  the  northern 
part  of  the  State,  shows  an  increase  of  tax-rate  of  2.62  dollars  in 
1905  to  3.38  dollars  in  1913,  or  about  24*  per  cent.  The  city  shows 
a  gain  in  taxables  of  about  30  per  cent  during  this  time. 

Vineennes  increased  from  a  tax-rate  of  1.60  dollars  in  1905  to 
3.10  dollars  in  1913,  or  nearly  100  per  cent,  while  the  valuation  of 
all  kinds  of  property  for  taxation  only  increased  about  40  per  cent. 
This  city  had  a  good  growth. 

Muncie  shows  an  increase  in  tax-rate  from  2.36  dollars  in  1906 
to  3.58  dollars  in'  1913,  or  about  47  per  cent,  while  tax  valuations 
show  an  increase  during  this  time  of  only  about  18  per  cent. 

Richmond  shows  an  increase  in  tax-rate  from  2.50  dollars  in 
1905  to  3.26  dollars  in  1913,  or  about  27  per  cent,  while  valuation 
for  taxation  of  all  kinds  of  personal  property  increased  only  about 
18  per  cent.  This  city  shows  an  increase  in  taxable  values  every 
year  since  1906,  a  steady  growth,  while  practically  every  county 
and  city  in  the  State  shows  gains  and  losses  during  the  different 
years  from  1905  to  1913. 

Again  some  interesting  things  are  disclosed  in  the  report  of 
1912.  The  total  value  of  all  personal  property  shown  in  this  last 
report  of  1913,  exclusive  of  railroads,  telephone,  pipe-line  and  ex- 
press companies,  which  are  valued  for  assessment  by  the  State  Tax 
Commission,  was  $416,876,113.  This  included  all  such  property 
as  moneys,  notes,  mortgages,  bank  stocks  and  deposits,  merchandise, 
manufactured  goods,  machinery,  live  stock,  poultry,  household 
goods,  in  fact,  all  classes  of  property  except  that  which  is  assessed 
by  the  State  Tax  Commission,  or  exempt  by  law,  $416,876,113. 

The  State  Statistician  in  his  report  gives  as  the  value  of  horses, 
mules,  cattle,  hogs,  and  sheep,  $133,184,315.  The  report  of  the 


TAXATION   IN   INDIANA  65 

Banking  Department  shows  resources  of  all  bank  and  trust  com- 
panies as  of  June  4,  1913,  equal  to  $509,244,536.40.  Allowing 
$100,000,000  for  duplication,  such  as  bank  deposits  in  other  banks, 
it  leaves  $409,244,536,  which,  added  to  the  value  of  live  stock,  makes 
a  total  for  this  class  of  property  alone,  all  of  which  is  taxable  under 
the  law,  of  $542,428,851,  or  $125,552,738  of  values  more  than  all  the 
personal  property,  except  railroads,  listed  in  the  entire  State  for 
taxation.  This  of  course  demonstrates  the  fact  that  large  valua- 
tions of  personal  property  certainly  are  not  listed  for  taxation. 
Probably  local  high  rates  are  more  responsible  for  this  than  any 
other  cause.  To  illustrate,  let  us  see  the  effect  of  the  Indiana  law 
upon  the  owner  of,  say,  a  $10,000  mortgage  upon  Indiana  real  estate, 
bearing  6  per  cent  interest  annually,  or  producing  an  income  of 
$600  per  year.  In  the  average  town  in  this  State  this  mortgage, 
assessed  according  to  law,  would  compel  the  owner  to  pay  about 
$350  per  year  for  taxes,  the  average  rate  being  about  3J  to  3|  per 
cent,  leaving  him  a  net  income  of  say  $250,  but  if  the  owner  of  this 
mortgage  lived  in  any  one  of  several  small  cities  or  towns  in  this 
State,  the  tax  would  be  based  on  a  rate  of  from  4£  per  cent  to  5  per 
cent,  causing  him  to  pay  $450  to  $500  for  taxes,  as  the  rates  in 
many  towns  and  cities  equal  the  above  amount.  He  would  there- 
fore have  left  a  net  income  from  his  mortgage  of  $100  to  $150.  If 
the  owner  of  such  a  mortgage  lived  in  Michigan,  he  would  pay  a 
recording  tax  of  one-half  of  1  per  cent,  or  $50,  and  this  would  be  all 
he  would  have  to  pay  during  the  life  of  the  mortgage.  If  the  owner 
lived  in  Wisconsin,  he  would  pay  an  income  tax  not  to  exceed  6 
per  cent,  or  $36  per  year.  If  the  owner  lived  in  Ohio  the  limit  of 
the  rate  of  taxation  would  be  1  per  cent,  so  that  he  would  pay  at 
the  outside  $100  per  year.  Thus  he  pays  for  the  privilege  of  living 
in  Indiana  over  the  privilege  of  living  in  any  of  the  above-named 
States  from  $300  to  $400  per  year.  It  can  readily  ~be  seen  that  this 
condition  practically  prevents  the  lending  of  local  money  upon 
mortgages  by  residents  of  this  State. 

These  problems  are  not  ours  alone.  Many  States  are  crying  for 
new  constitutions  or  amendments  to  the  taxing  laws.  As  shown 
already  the  most  serious  obstacles  toward  getting  full  lists  and 
values  of  taxable  personal  property  are  the  excessive  local  rates  in 
certain  localities.  The  average  local  rate  in  cities  and  towns  is 
over  3|  per  cent,  in  some  as  high  as  5  per  cent,  in  many  4  per  cent 
as  before  stated.  The  effect  of  this  upon  the  owner  of  securities 
producing  a  moderate  income  is  very  apparent.  Ohio  recently  has 

5-2902 


66  INDIANA   UNIVEKSITY 

had  a  law'enacted  limiting  the  rate  of  taxation  to  one  per  cent  and 
about  one-half  per  cent  additional  under  certain  conditions.  All 
property  is  valued  at  its  true  cash  value  for  taxation  purposes. 
This  has  resulted  in  an  enormous  increase  in  the  budget  of  taxable 
property  as  the  report  of  1913  shows  a  total  value  of  $6,719,068,969 
as  against  about  $1,975,000,000  in  Indiana  for  the  same  year.  The 
State  of  Michigan  has  a  classification  tax  or  registration  tax  for 
mortgages,  and  so  forth.  Still  the  last  year's  report  shows  a  total 
value  of  $2,712,135,196.  Wisconsin  has  an  income  tax  as  applied 
to  certain  personal  property.  This  of  course  would  not  show  in  the 
value  for  assessment  purposes,  yet  the  Wisconsin  budget  shows  a 
total  valuation  of  $2,031,924,385. 

I  have  not  time  in  this  paper  to  go  into  further  detail  and  must 
let  you  draw  your  own  conclusions.  All  real  estate  is  assessed,  but 
not  at  its  true  value;  personal  property  is  not  all  assessed,  very 
much  indeed  escaping,  but  such  as  is  listed  with  easily  determined 
values  is  assessed  on  the  whole  higher  than  land,  but  land  bears  the 
larger  burden  because  of  the  sequestration  and  evasion  of  personal 
property. 

We  are  constantly  striving  to  bring  about  uniformity  between 
various  classes  of  property  and  various  taxing  districts,  but  under 
the  present  law  are  often  helpless  to  secure  that  for  which  we  strive. 
The  growing  burden  of  additional  taxation  both  by  increasing 
values  and  increasing  rates  causes  many  to  be  rebellious  and  to 
ignore  the  law.  We  need  many  changes  and  reforms,  to  secure 
which  will  necessitate  a  new  constitution  or  changes  in  the  present 
constitution.  We  need  new  laws  that  will  give  more  power  to  those 
whose  duty  it  is  to  supervise  the  general  work  of  taxation,  and  we 
certainly  need  laws  that  will  restrict  and  circumscribe  the  expendi- 
ture of  money  raised  by  taxation.  The  people  should  not  be  com- 
pelled to  pay  more  for  services  or  constructive  work  purchased  by 
the  State  or  the  municipality  than  it  would  cost  the  individual  if 
he  were  bidding  for  like  service.  Laws  must  meet  the  intelligent 
approval  and  endorsement  of  the  people  as  being  just  and  fair  or 
they  are  useless  and  ineffectual.  That  much  reform  is  needed  in 
our  taxing  methods  is  unquestioned,  that  this  can  be  accomplished 
under  present  conditions  is  highly  problematical. 


TAXATION   IN  INDIANA  67 

HOW  HIGH  TAXES  AFFECT  TANGIBLE  PROPERTY 
(REAL  ESTATE) 

,T.  EDWARD  MORRIS,  President  Indiana  Real  Estate  Association 

This  subject  is  one  that  is  becoming  more  and  more  serious  as 
the  years  go  by.  It  is  one  in  which  the  real  estate  men  of  our  State 
are  vitally  interested.  The  real  estate  man  of  today  is  not  like  the 
real  estate  man  of  twenty  to  twenty-five  years  ago,  and  he  is  today 
filling  a  different  place  in  public  life  from  what  he  was  in  years 
gone  by.  More  and  more  he  is  taking  upon  himself  the  duty  which  . 
rightfully  belongs  to  him,  of  looking  after  and  protecting  real  estate 
and  its  owners  in  the  community  in  which  he  lives.  He  is  more 
and  more  coming  to  be  to  real  estate  and  its  owners  what  the  physi- 
cian is  to  the  sick,  the  lawyer  to  the  man  in  trouble.  Therefore,  it 
is  easy  to  understand  why  the  real  estate  men  of  Indiana  would  be 
vitally  interested  in  the  matter  of  taxation,  because  today  real 
estate  is  bearing  the  burden  of  taxes. 

Real  estate,  as  you  know,  is  assessed  in  Indiana  every  four  years, 
and  practically  every  State  in  the  Union  follows  the  same  plan.  A 
few  States,  however,  assess  their  real  estate  every  year.  When  the 
township  assessor  begins  the  assessment  of  real  estate,  he  has  with 
him  a  plat  of  all  of  the  real  estate  and  the  names  of  its  owners  in* 
his  township,  and  there  is  absolutely  no  escape  for  the  taxpayer 
owning  real  estate,  for  it  is  in  plain  view,  together  with  all  of  the 
improvements  thereon.  Though  it  is  true  that  the  assessment  of 
real  estate  throughout  Indiana  and  practically  every  other  State  in 
the  Union  is  not  at  its  true  cash  value  as  the  law  provides,  yet  the 
assessment  is  made  to  cover  everything,  because  it  is  in  plain  view 
of  the  assessor,  while  a  large  per  cent  of  the  intangible  property 
escapes.  It  has  been  said  by  those  who  ought  to  know  that  the  ac- 
tual value  of  the  sequestered  intangible  property  in  Indiana  is 
more  than  the  value  of  all  of  the  assessed  values  of  the  State.  It 
is  said  that  the  deposits  of  money  in  Indiana  banks  today  greatly 
exceed  the  reported  value  of  all  of  the  personal  property  in  the 
State  listed  for  taxation,  and  yet  money  is  only  one  item  in  the  per- 
sonal property  list.  It  is  a  wrong  and  an  outrage  against  tangible 
property,  and,  in  the  main,  real  estate  is  bearing  this  burden.  It 
cannot  escape,  and  the  load  is  piled  upon  it.  There  has  been  much 
complaint  about  the  assessment  of  farm  land  in  the  State  of  In- 
diana, to  the  effect  that  it  has  not  been  assessed  at  more  than  50  per 
cent  of  its  real  cash  value.  But  when  you  take  into  consideration 
that  the  farmer  has  his  land  assessed,  his  improvements,  all  of  his 


68  INDIANA    UNIVERSITY 

live  stock,  farm  implements,  and  every  other  tangible  piece  of 
property  on  his  farm,  it  is  safe  to  say  that  he  pays  his  share  of  the 
taxes. 

Tin-  greatest  question  to  solve,  in  my  judgment,  concerning  the 
tax  law  and  its  effect  on  all  classes  of  property  is  the  matter  of 
stopping  up  the  many  avenues  of  escape  for  intangible  property 
from  the  tax-duplicate.  Here  lies  the  trouble.  A  few  days  before 
the  first  of  March  each  year,  a  very  large  per  cent  of  the  money  in 
bank  and  elsewhere  in  our  State  is  transferred  into  non-taxable 
property.  This  only  lasts  for  a  few  days,  and  while  the  purchaser 
or  borrower  of  non-taxable  property  avails  himself  of  this  avenue 
of  escape,  he  is  perfectly  willing  to  pay  a  small  per  cent  for  this 
transfer  of  taxable  to  non-taxable  property  for  just  a  few  days. 
This  has  been  a  custom,  not  only  in  Indiana,  but  in  many  other 
States  throughout  the  Union  for  years.  For  the  time  being  it  dis- 
rupts business,  unsettles  the  banking  conditions,  because  the  banker 
is  never  able  to  estimate  the  amount  of  this  kind  of  business  that  is 
going  to  be  transacted. 

Under  our  present  law,  avenues  of  escape  are  provided  on 
every  hand.  I  might  say  that  a  few  years  ago  a  resident  of  this 
State,  a  very  large  landowner  and  a  man  who  lent  a  great  deal 
of  money,  up  in  the  millions,  never  had  personal  property  tax  in 
the  State  of  Indiana,  in  any  one  year  out  of  twenty-one,  in  excess 
of  1,300  dollars.  It  was  the  custom  of  this  taxpayer  to  make  an 
affidavit  in  Indiana  that  he  paid  his  personal  property  tax  in 
another  State.  It  was  also  his  custom  to  make  an  affidavit  in 
that  other  State  that  he  paid  his  personal  property  tax  in  Indiana, 
both  of  which  were  falsehoods.  This  is  only  one  instance  on  a 
very  large  scale  where  a  man  lent  millions  and  millions  of  dollars 
to  mortgagors  on  property,  held  those  mortgages  for  a  time,  sold 
and  transferred  them  to  a  foreign  corporation.  This  man  was 
subject  to  taxation  in  Indiana,  but  through  trickery  and  dishonesty 
was  able  to  escape  the  personal  property  tax  largely  because  of 
the  looseness  of  our  law.  While  we  believe  that  a  large  number 
of  cases  like  this  could  be  dug  up  in  our  State,  we  are  also  of 
the  belief  that  most  people  are  honest  and  want  to  do  the  fair  and 
square  thing  in  all  matters,  as  well  as  in  taxation,  and  we  further 
believe  that  if  the  rates  of  taxation  in  the  various  municipalities 
of  our  State  were  not  so  high,  that  the  majority  of  the  people 
would  be  honest,  and  give  their  property  in  for  taxation.  I  have 
in  mind  a  very  distinguished  gentleman  of  large  means  in  the 
State  of  Indiana,  who  has  been  thinking  for  several  years  of 


TAXATION   IN   INDIANA  69 

leaving  the  State  because  of  the  high  tax-rate.  This  man  is  a 
large  money  lender,  and  because  o,f  the  excessive  rate  in  the  city 
in  which  he  lives,  feels  that  he,  in  justice  to  himself,  should  move 
away  into  another  State  where  the  rate  of  taxation  is  not  so  high 
and  the  burdens  are  distributed  more  equally.  You  can  readily 
see  that  where  a  man  lends  thousands  and  even  millions  of  dollars 
at  6  per  cent,  and  the  prevailing  tax  rate  is  as  high  in  some  in- 
stances as  4|  cents,  he  has  but  very  little  left  for  himself,  and 
this  is  one  of  the  reasons  that  compel  men  to  do  things  which  are 
riot  right  and  perhaps  dishonest.  They  not  only  convert  that 
money  into  non-taxable  securities,  but  in  many  instances  move 
away. 

Now  you  may  ask,  Wherein  does  this  affect  real  estate  and 
other  forms  of  tangible  property?  It  is  very  evident  that  every 
dollar  of  taxable  property  that  escapes  from  the  tax-duplicate 
loads  that  much  more  of  a  burden  on  the  property  that  cannot 
escape.  I  wish  to  call  your  attention,  briefly,  to  the  law  recently 
passed  in  Ohio,  of  which  you  will  hear  more  during  this  conference, 
providing  for  a  maximum  rate  of  taxation.  This,  of  course,  in- 
creases the  value  of  all  kinds  of  property  to  its  true  cash  value. 
I  wish  to  quote  from  the  highest  tribunal  of  the  land,  the  Supreme 
Court  of  the  United  States,  in  which  it  says,  "It  is  a  cardinal 
rule,  that  never  should  be  forgotten,  that  whatever  property  is 
worth  for  the  purpose  of  sale,  it  is  worth  for  the  purpose  of 
taxation."  I  wish,  also,  to  call  your  attention  to  the  Ohio  law 
as  far  as  state  revenues  are  concerned.  It  places  state  revenues 
on  a  per  capita  basis,  showing  that  under  the  new  law  in  Ohio 
the  cost  of  running  the  State  is  less  than  in  Indiana  on  the  same 
basis.  For  instance,  in  the  year  1913  Ohio  collected  for  state 
revenues  only  $12,658,508.63 ;  on  the  basis  of  4,768,121  population 
in  1910  this  would  be  a  total  cost  of  $2.65  per  capita.  The  total 
amount  of  State  revenue  collected  in  Indiana  in  1913  was  $9,628,- 
826.78.  This  distributed  equally  on  a  basis  of  a  population  of 
2,700,876  would  amount  to  $3.56  per  capita,  or  91  cents  more  than 
the  cost  per  capita  in  the  State  of  Ohio. 

I  am  also  of  the  opinion  that  it  is  a  mistake  to  exempt  any 
kind  of  property  from  taxation.  I  understand  that  the  State  of 
Wisconsin  has  an  income  tax  law,  which  provides  for  a  great 
many  exemptions.  For  instance,  the  laborer  or  the  business  man 
is  exempt  from  taxation  up  to  the  amount  of  $800.  It  is  my 
judgment  that  any  law  providing  for  the  exemption  of  property 
is  unfair.  The  purpose  of  taxation  is  to  distribute  the  burden 


70  INDIANA   UNIVERSITY 

equally  according  to  conditions,  and  to  make  any  exemptions  is 
just  to  add  another  avenue  of  escape  for  the  taxpayer.  There 
is  no  question  about  where  the  burden  of  taxation  lies  if  some 
property  is  exempted,  and  if  many  avenues  are  provided  for  the 
escape  of  intangible  property.  There  is  only  one  natural  result, 
and  that  is  that  the  burden  will  be  placed  on  real  estate. 

One  of  the  best  evidences  of  this  fact  can  be  found  by  making 
an  examination  of  the  records,  not  only  in  Marion  county,  but 
in  every  county  of  Indiana,  concerning  delinquent  tax,  and  espe- 
cially of  that  on  real  estate.  Many  pieces  of  real  estate  situated 
in  the  cities  have  been  sold,  not  only  on  account  of  ithe  burden 
being  placed  on  real  estate,  but  also  on  account  of  the  high  tax- 
rate.  In  many  cities  this  is  practically  confiscatory.  This  brings 
up  another  question  concerning  which  I  wish  to  speak,  and  that 
is,  that  many  men  believe  that  some  of  our  tax  officers  and  men 
in  authority  lose  sight  of  the  most  important  thing,  which  is  not 
the  raising  of  the  tax  or  providing  a  law  to  raise  taxation,  but 
the  spending  of  the  money  after  it  is  raised.  .  It  is  a  very  easy 
matter  to  pass  a  law  for  the  assessment  of  property  and  the  col- 
lection of  the  money,  but  the  greatest  question  that  confronts  the 
people,  not  only  of  Indiana,  but  throughout  this  country,  is  the 
proper  spending  of  it  after  it  is  collected.,  so  that  the  people  may 
get  value  received  for  what  they  have  purchased.  I  feel  that 
there  should  be  a  law  passed  providing  for  a  maximum  rate  of 
taxation,  like  unto  the  one  recently  passed  in  the  State  of  Ohio. 
It  is  possible  that  a  law  could  not  be  passed  directly  affecting 
the  men  who  spend  the  money,  but  if  a  law  provided  for  a  maxi- 
mum rate  of  taxation,  there  would  be  only  so  much  money  to 
spend,  and  this  would  be,  in  my  judgment,  a  good  thing. 

Another  very  embarrassing  question  concerning  this  matter  of 
assessing  real  estate  is  this.  As  you  know,  the  township  assessor 
is  elected  by  the  people,  and  of  course  he  is  usually  under  certain 
political  obligations  which  tend  to  lower  the  efficiency  of  his  work. 
Oftentimes  he  is  a  man  who  in  many  ways  is  absolutely  unqualified 
to  do  the  work  that  he  is  called  upon  to  do.  In  most  instances  it 
is  safe  to  assume  that  he  does  the  best  he  can.  It  is  quite  likely 
that  in  most  cases  he  has  little  or  no  knowledge  whatever  of  the 
importance  of  his  job.  No  business  man  in  the  business  world 
today  is  going  to  select  a  person  who  is  unqualified  and  unfitted  to 
do  the  most  important  work  in  connection  with  his  particular 
business.  It  is  my  belief  that  the  matter  of  assessing  property 
is  one  of  the  most  important  features  in  the  whole  matter  of 


TAXATION    IN    INDIANA  71 

taxation.  I  believe  that  the  time  is  here  when  men  who  assess 
property  should  have  qualities  that  would  fit  them  for  that  work, 
and  perhaps  there  should  be  a  law  passed  by  which  some  one  would 
have  authority  and  could  engage  or  employ  these  men  who  would 
'conform  to  and  fit  the  conditions  under  which  they  are  employed. 
Whenever  the  day  comes  that  the  township  assessor  will  be  quali- 
fied to  assess  the  various  kinds  of  property,  then  one  of  the  greatest 
questions,  as  (far  as  taxation  is  concerned,  will  be  solved.  The 
business  man,  as  soon  as  he  finds  out  that  one  of  his  employes  is 
incompetent,  gets  ready  at  once  to  rid  himself  of  the  employe  and 
proceeds  to  engage  the  services  of  some  one  who  he  thinks  is  quali- 
fied to  do  the  work  that  he  wants  done. 

Now,  gentlemen,  it  is  obvious,  for  example,  that  the  time  will 
arrive  when  the  tax  levied  against  mortgages,  bonds,  stocks,  and 
other  such  forms  of  property  will  reach  a  point  where  it  con- 
fiscates or  nearly  confiscates  the  earnings  from  these  forms  of  prop- 
erty. It  has  been  said  that  probably  between  75  and  90  per  cent 
of  the  money  lent  to  farmers  in  Indiana  now  is  lent  by  nonresi- 
dents and  principally  by  the  great  insurance  companies  of  the 
East.  These  nonresidents  escape  taxation,  whereas  the  Indiana 
lender  has  to  turn  over  from  one-third  to  three-fourths  of  his 
income.  He  cannot  afford  to  do  it,  so  he  seeks  non-taxable  or 
tax-evading  forms  of  investments,  or,  as  is  the  fact,  moves  out 
of  the  State.  This,  you  see,  gives  the  foreign  lenders,  consisting 
largely  of  corporations  centering  in  what  is  known  as  Wall  Street , 
a  monopoly.  Perhaps  it  does  not  work  greatly  to  the  disadvantage 
of  the  farmer  in  periods  when  money  is  easy,  but  when  big  capital 
is  timid,  or  when  it  seeks  to  take  advantage  of  investment  condi- 
tions, it  shuts  off  the  loans  to  farmers  and  forces  high  percentages 
and  high  commissions.  The  Indiana  farmer  whose  loan  is  expir- 
ing this  year  knows  what  the  situation  is,  and  his  appeal  to  the 
Indiana  man  for  money  is  not  heard,  because  the  latter  cannot 
pay  the  tax-rate,  which  now  averages,  according  to  the  latest 
reports,  over  3|  per  cent  in  Indiana  towns  and  cities.  You  can 
thus  see  that  the  present  conditions  under  our  present  taxing 
system  are  driving  home  money  away  and  inviting  the  use  of  out- 
side money.  It  is  safe  to  assume  that  the  lender  of  money  who 
resides  inside  the  State  does  not  want  any  higher  net  rate  for  the 
use  of  his  money  than  the  man  or  corporation  living  outside  the 
State,  and  so  it  would  seem  that  all  that  is  needed  to  provide  all 
the  home  money  at  5  per  cent  that  is  wanted,  in  times  of  normal 
financial  conditions,  is  to  take  steps  for  modernizing  and  equalizing 


72  INDIANA   UNIVERSITY 

our  taxing  system,  such  as  other  States  have  done  in  recent  years. 
To  the  average  man  there  is  nothing  amazing  about  the  inequalities 
in  taxation,  and  in  drawing  attention  to  these  inequalities  I  am 
merely  endeavoring  to  place  emphasis  on  a  fact  of  common  knowl- 
edge. This  is  necessary,  of  course,  for  exact  knowledge  is  needed 
in  order  to  change  any  law  to  meet  the  actual  needs,  but  every 
person  who  has  ever  made  out  an  assessor's  list  must  have  been 
impressed  with  the  unusual  opportunity  which  our  present  scheme 
offers  for  evasion.  Real  estate,  as  you  know,  cannot  be  hidden, 
but  personal  property,  especially  in  the  form  of  such  things  as 
cash,  jewelry,  bank  deposits,  stocks,  bonds,  and  the  like  is  fre- 
quently absurdly  undervalued  or  completely  hidden  so  persistently 
that  no  thought  of  immorality  is  attached  to  the  practice. 

Now,  for  the  reason  that  the  poor  have  so  little  to  hide,  tax- 
dodging  is  less  common  among  them  than  the  rich,  and  it  is  this 
fact  that  excites  much  of  the  discontent  which  now  and  then 
breaks  out  in  various  communities.  In  dodging  his  tax,  the  rich 
man  does  not  cheat  the  government,  for  the  government  is  going 
to  have  all  the  money  necessary  to  transact  its  business.  He 
merely  shifts  his  burden  to  the  shoulders  of  some  one  whose  wealth 
is  in  such  form  that  it  cannot  be  sequestered.  Some  one  must 
support  the  government.  Under  our  present  system,  it  is  more 
likely-  to  be  the  small  property-owner  than  the  rich  man,  and  out 
of  this  injustice  comes  most  of  the  complaint. 

Now,  gentlemen,  the  answer  to  the  question  of  how  the  high 
tax  affects  tangible  property  can  be  reduced  to  a  few  words.  It 
makes  real  estate  or  tangible  property  the  burden-bearer  to  the 
extent  that  it  tends  toward  the  confiscation  of  property,  also  to 
the  extent  of  driving  money  out  of  'the  State,  and  diverting  it 
into  channels  that  are  much  more  hazardous  investments  than 
investments  in  real  estate  would  be.  I  ask  you  the  question, 
What  would  happen  if  a  law  were  put  on  bur  statute  books 
exempting  real  estate  from  taxation?  You,  yourselves,  know  the 
answer.  Many  of  you  having  your  investments  in  some  form  of 
taxable  securities  have  found  out  to  your  sorrow  in  the  last  few 
months  that  they  are  not  worth  much  as  collateral  in  bank  when 
you  want  to  borrow  money.  The  condition  is  really  becoming 
appalling.  Tax-rates  in  our  State,  as  well  as  the  appraisements 
of  property,  in  the  last  decade  have  been  rapidly  increasing,  and 
I  declare  to  you  that  unless  there  is  some  change  in  our  taxing 
system,  they  will  rise  more  rapidly  in  the  next  decade  than  they 
have  in  the  past.  Something  must  be  done,  and  it  is  the  hope  of 


TAXATION   IN   INDIANA  73 

the  real  estate  men  in  the  State  of  Indiana  that  in  the  coming 
session  of  the  General  Assembly  in  this  State  every  step  that  can 
be  taken  to  give  relief  along  this  line  will  be  taken. 

In  conclusion,  I  wish  to  say  that  the  tax  question  goes  far 
deeper  than  some  of  us  can  realize.  Its  final  solution  will  involve 
an  endless  amount  of  intelligent  agitation  and  effort  that  will  be 
wasted  unless  accomplished  by  a  higher  quality  of  thinking  than 
we  have  displayed  in  the  past.  But  something,  I  think,  can  be 
done  toward  bringing  about  a  fair  and  equal  distribution  of  the 
burden  o,f  taxation.  When  I  say  this,  I  mean  that  practically 
all  kinds  of  property  should  be  assessed,  that  there  should  be 
few,  if  any,  exemptions.  I  have  but  very  little  use  for  the  man 
who  does  not  pay  his  taxes,  because  a  man,  whether  rich  or  poor, 
should  bear  his  share  of  the  burden. 

HOW  HIGH  TAX-RATES  AFFECT  MANUFACTURERS 

A.  M.  GLOSSBRENNER,  Vice-President  of  Levey  Brothers  and  Company, 

Indianapolis 

Mr.  Morris,  the  gentleman  who  preceded  me,  did  not  think 
that  any  property  should  be  exempted.  I  am  going  to  take  the 
position,  and  try  to  prove  to  you,  that  some  property,  if  exempted, 
will  increase  the  value  of  his  real  estate. 

The  welfare  of  every  wage-earner  and  his  family,  and,  in  fact, 
of  every  producer  in  the  country,  is  dependent  on  good  business, 
which  is  the  pulse  of  prosperity,  both  personal  and  national. 

Surely,  therefore,  government  should  serve  the  interests  of 
business  well,  for  government,  after  all,  is  simply  a  public  service, 
bought  and  paid  for  by  the  taxed. 

The  quality  of  this  service  depends  on  how  the  government  is 
determined  and  administered;  it  is  a  good  service  or  a  poor  one 
in  accordance  with  the  laws  enacted  by  our  legislative  bodies,  the 
manner  in  which  these  laws  are  enforced,  and  the  way  the  funds 
or  revenue  from  taxation  are  expended. 

It  would  logically  appear  that  the  payment  of  taxes  at  an 
equitable  rate  should  assure  the  buyers  of  this  public  service,  or 
the  taxpayers,  a  government  that  would  promote  prosperous  con- 
ditions. 

Likewise,  under  a  high  tax-rate,  the  government  should  be  a 
service  of  superexcellence,  highly  efficient,  and  economically  advan- 
tageous to  every  one  living  under  it. 

But  we  must  not  lose  sight  of  the  fact  that  although  the  people 


74  INDIANA     I'XIVKUKITY 

who  bear  the  burden  of  high  tax  really  pay  for  the  public  service 
known  as  government,  the  nature  of  that  government  is  determined 
by  all  voters  regardless  of  what  share  of  tbe  tax  burden  they 
sustain  or  whether  they  pay  any  taxes  at  all. 

Government,  then,  is  a  composite  expression  of  the  entire  citizen- 
ship without  any  consideration  of  who  pays  the  freight.  That 
doubtless  accounts  for  the  frequency  with  which  it  is  manifested 
both  low  in  quality  and  high  in  cost! 

Hoth  taxation  of  all  industrial  property  and  the  treatment  of 
industry  by  the  government,  therefore,  depend  on  the  attitude  of 
this  voting  composite. 

Hence  we  see  how  highly  important  it  is  that  the  public  gener- 
ally should  come  into  a  proper  appreciation  of  the  fact  that  in- 
dustry must  not  be  overtaxed,  either  in  the  direct  way  or  through 
losses  sustained  through  demagogic  legislative  persecution. 

Business  and  government  are  very  closely  interwoven;  in  fact, 
I  consider  them  inseparably  allied.  You  cannot  disturb  one  with- 
out affecting  the  other,  and  I  conclude  that  there  must  be  some 
sort  of  disturbance  existing  between  them  or  else  we  would  not 
be  here  engaged  in  this  conference.  Unfortunately,  this  disturb- 
ance is  not  confined  to  the  State  of  Indiana;  it  is  nation-wide. 

In  my  judgment,  the  cause  of  it  is  deeper  than  most  of  us 
think;  fundamentally,  I  believe  it  to  be  the  result  of  our  efforts 
to  establish  higher  standards  of  living.  This  has  increased  the 
cost  of  everything  we  produce  and  consume  and  consequently  has 
called  for  increased  revenue  and  taxes,  for  the  State  and  nation 
must  pay  an  increased  price  for  everything  used  just  as  surely  as 
the  individual  citizen  does  if  prices  are  increased  from  any  cause. 

Therefore,  it  is  time  we  should  confer  in  an  endeavor  to 
analyze  the  prevailing  conditions.  It  is  well  that  we  try  to  deter- 
mine whither  we  are  drifting,  instead  of  going  blindly  on  until 
perhaps  we  may  have  revolution  staring  us  in  the  face. 

In  our  wastefulness  and  public  extravagance  we  have  gone  on 
increasing  the  taxes  to  provide  for  increased  expenditures,  with 
the  idea>  perhaps,  that  the  tax  will  ~be  paid  by  the  larger  industries. 
This  theory  is  erroneous;  every  item  of  added  cost  to  the  manu- 
facturer must  be  passed  on  to  the  purchaser  or  final  consumer, 
whoever  he  may  be,  or,,  in  other  words,  the  more  taxes  that  we 
manufacturers  are  forced  to  pay,  the  greater  will  be  our  cost  of 
production,  and  the  higher  the  price  of  our  products. 

No  one  dislikes  an  increase  in  price  more  than  the  producer. 
It  invariably  decreases  the  amount  and  the  number  of  orders  and 


TAXATION   IN   INDIANA  75 

has  a  generally  disturbing  effect  on  his  trade,  but  when  the  manu- 
facturer's  cost  is  increased  from  any  cause,  he  has  no  alternative 
but  to  increase  his  selling  price. 

So,  as  a  concrete  proposition,  the  higher  the  tax  you  place  on 
the  products  of  labor,  the  dearer  those  products  become,  and  it 
will  follow  that  in  proportion  as  cost  increases,  production  will 
diminish;  as  production  lessens  labor  becomes  idle  and  competi- 
tion ensues  between  labor  for  employment,  thus  reducing  wages. 
The  number  of  factory  workmen  out  of  employment  during  the 
present  business  depression  should  impress  all  citizens  with  the 
fact  that  a  most  serious  condition  now  exists  in  the  business  world. 

In  the  readjustment  necessitated  by  the  changing  conditions  of 
our  time,  manufacturers  and  business  men  generally  have  found 
it  necessary  to  combat  both  State  and  national  legislation.  Industry 
and  business  have  been  so  hampered  and  harassed  during  the  last 
few  years  that  the  li,fe  of  the  manufacturer  especially  has  become 
a  burden  indeed,  and  our  Indiana  industries  have  been  seriously 
restricted.  Legislators  have  apparently  become  obsessed  with  the 
idea  that  business  can  withstand  all  assaults  and  have  therefore 
used  it  as  a  target  until  it  has  almost  been  shot  to  pieces. 

Commerce  and  industry  constitute  an  economic  structure  as 
delicate,  comparatively,  as  the  movement  of  a  costly  watch,  and 
with  as  fine  a  balance  and  adjustment  as  a  great  electric  dynamo. 
When  you  cast  legislative  sand  into  the  works  of  business  it 
throws  the  whole  mechanism  out  of  gear  and  the  people  dependent 
for  their  livelihood  on  the  industries  must  suffer. 

So  far  as  our  Indiana  tax  laws  are  concerned,  the  trouble  as 
it  appears  to  me  is  the  inequality  of  the  basis  of  arriving  at 
valuation  on  which  assessments  are  fixed.  Manufacturers  feel  they 
are  being  discriminated  against  because  their  property  is  tangible, 
while  in  the  case  of  other  citizens  whose  capital  is  invested  in 
securities  there  is  an  opportunity  for  possessions  either  to  be  con- 
cealed or  else  undervalued  to  such  an  extent  that  the  rates  of 
taxation  on  the  tangible  property  must  necessarily  be  greatly 
increased. 

However,  it  is  not  my  purpose  to  attack  the  citizen  who  has 
capital  to  invest;  on  the  contrary,  if  we  could  only  bring  our 
legislators  to  perceive  and  appreciate  what  benefits  may  accrue 
to  the  people  of  our  State  from  an  abundance  of  capital  they 
surely  would  enact  laws  that  would  serve  as  an  inducement  to 
capital  to  come  into  the  State  for  permanent  investment,  as  some 
of  our -Eastern  States,  for  example,  New  York,  Pennsylvania,  and 


76  INDIANA   UNIVERSITY 

Massachusetts,  have  done.  Capital  goes  where  conditions  are  suffi- 
ciently attractive  for  it  to  stay;  the  more  capital  we  can  secure, 
the  more  industries  we  can  develop,  thus  increasing  our  population 
and  our  permanent  assets. 

The  more  difficult  you  make  it  for  the  manufacturers  to  do 
business,  the  less  likely  they  are  to  develop  their  industries  into 
larger  proportions;  if  you  handicap  them  they  feel  their  efforts 
are  not  worth  while,  and  if  continually  harassed  by  unfavorable 
legislation  and  high  taxes,  they  will  sooner  or  later  seek  other 
locations  for  their  industries. 

Any  city  or  State,  broadly  speaking,  is  simply  the  people  who 
live  and  do  business  within  its  borders,  and  if  the  problems  of 
population  and  community  interest  are  correctly  analyzed  it  seems 
to  me  we  shall  find  that  about  the  best  thing  any  city  or  State 
has  to  sell  is  bigger  opportunities  for  manufacturers,  because  in- 
dustries, with  their  wage-earners,  are  the  foundation  of  our  growth 
and  from  this  source  real  development  starts. 

Land  values  are  created  by  population.  The  value  of  a  site 
is  determined  largely  by  the  number  of  people  who  pass  and  by 
the  demand  for  its  use  for  productive  purposes.  It  has  been 
estimated  that  every  man  in  any  community  adds  at  least  $1,000 
to  that  community's  land  value,  therefore  every  new  manufactur- 
ing plant  added  to  a  city  will  automatically  solve  the  problem  of 
increasing  population.  Each  factory  brings  its  workers  with  wages 
to  spend ;  this  makes  business  for  the  stores,  the  newspapers,  the 
banks,  and  other  institutions  in  exact  ratio  to  the  number  of  wage- 
earners  who  come  to  or  reside  in  a  city. 

If  this  fact  were  properly  appreciated  in  Indiana,  our  laws 
would  provide  that  the  taxes  should  fall  most  lightly  on  productive 
property,  for  no  one  can  earn  or  honestly  make  anything  without 
benefiting  other  people.  That  the  State  of  Pennsylvania  fully 
realizes  the  value  of  its  manufacturing  industries  is  best  evidenced 
by  the  laws  they  have  enacted:  ''The  act  of  June  8,  1893, 
exempts  from  taxation  the  value  of  so  much  of  the  capital  stock 
of  corporations  or  associations  organized  for  manufacturing  pur- 
poses as  is  invested  and  actually  and  exclusively  employed  in 
carrying  on  manufacturing  within  the  State".  Quoting  from  a 
letter  received  from  the  Auditor-General  of  Harrisburg,  Pa., 
Nov.  27,  1914 :  ' '  In  the  case  of  manufacturing  corporations  the 
appraisement  is  made  as  in  the  case  of  other  corporations,  but 
they  are  exempted  from  taxation  on  all  the  real  estate,  buildings, 
machinery,  raw  material,  manufactured  product,  cash  and  current 


TAXATION    IN   INDIANA  77 

assets,  and  bills  and  accounts  receivable  actually  used  and  exclu- 
sively employed  for  manufacturing  within  the  State." 

Within  the  borders  of  the  State  of .  Indiana  our  citizens  may 
feel  that  they  can  enact  such  legislation  as  they  may  please,  but 
a  careful  investigation  will  demonstrate  that  it  is  not  possible 
for  us  to  do  exactly  as  we  please  because  our  industries  doing  an 
interstate  business  are  most  vitally  affected  by  the  conditions  that 
govern  in  our  respective  competitive  fields;  for  example,  if  neigh- 
boring States  continue  to  pass  laws  more  favorable  to  their  manu- 
facturing industries  (such  as  Pennsylvania  has  enacted)  than  we 
have  operative  in  Indiana,  we  shall  find  that  eventually  our  Indiana 
manufacturing  industries  will  be  attracted  to  these  more  favorable 
localities  because  of  the  competition. 

I  believe  it  is  pertinent  to  this  discussion,  because  it  is  another 
tax,  to  call  the  attention  of  this  body  to  another  law  with  which 
it  is  proposed  to  burden  the  manufacturer,  in  the  form  of  a  work- 
man's  compensation  act.  Many,  perhaps  the  majority,  of  our 
manufacturers  would  not  oppose  a  just  and  equitable  law  of  this 
nature;  but,  if  such  a  law  be  enacted  as  the  manufacturers  of 
some  States  have  had  foisted  upon  them,  New  York  State  for 
example,  another  crimp  will  be  put  in  business  that  will  ultimately 
have  the  effect  of  driving  many  industries  from  the  State. 

It  is  reported  that  as  a  result  of  this  New  York  law  some  of 
the  greater  industries  there  are  contemplating  dismantling  their 
plants  and  moving  from  the  State  and  this  will  be  the  result  in 
Indiana  if  such  a  vicious  act  is  passed.  If  our  legislators  will 
listen  to  reason  they  will  find  Indiana  manufacturers  welcoming 
a  fair  workman 's  compensation  law ;  but  if,  on  the  other  hand,  the 
manufacturers  are  again  compelled  to  increase  prices,  to  provide 
for  an  unreasonable  amount  as  compensation,  it  will  be  rendered 
doubly  difficult,  if  not  impossible,  for  them  to  meet  the  competition 
in  their  market.  And,  gentlemen,  as  surely  as  conditions  of  hard- 
ship are  imposed  on  them,  the  manufacturers  are  going  to  take 
steps  to  relieve  themselves.  Remember,  as  I  said  before,  the  manu- 
facturer must  surely  add  this  compensation  tax  to  his  cost  of 
production,  which  means  that  the  consumer  must  pay  it. 

Close  competition  in  manufacturing  is  constantly  narrowing 
the  margin  of  profit  for  the  man  who  is  willing  to  risk  his  capital. 
If  the  man  with  money  to  invest  is  afraid  to  venture  it  because 
of  a  maelstrom  of  disturbance,  vicious  legislation,  and  high  taxes, 
then  both  the  laborer  and  the  consumer  must  suffer. 

So,  there  can  be  but  one  outcome  of  high  taxes  with  respect  to 


78  INDIANA   UNIVERSITY 

manufacturing  industries — they  increase  the  cost  of  production 
and  make  it  necessary  to  pass  the  increase  on  to  the  consumer, 
provided  the  manufacturer  can  find  a  market  for  the  higher- 
priced  product,  which  must  compete  with  the  products  of  other 
manufacturers  whose  costs  are  lower. 

Permit  me,  therefore,  to  sound  this  note  of  warning  to  the 
citizens  of  Indiana,  that  they  should  refrain  from  imposing  any 
further  burdens  on  the  manufacturers  of  the  State  if  they  regard 
industries  as  assets  and  desire  to  have  them  increase  and  multiply. 

HOW  THE  FARMER,  THE  LARGE  TAXPAYER,  IS 
INTERESTED  IN  TAXATION 

DANE  S.  DUNLOP,  Greencastle 

My  friends,  David  could  not  wear  Saul's  armor.  Accordingly, 
this  afternoon,  I  will  have  to  talk  to  you  just  as  I  would  at  our 
Saturday  night  discussion  at  the  schoolhouse  in  Putnamville,  when 
such  citizens  of  Warren  township  as  feel  so  disposed  gather  in 
social  and  patriotic  fashion  and  proceed  to  ' '  save  the  country. ' '  I 
am  not  a  farm-institute  speaker,  nor  a  political  speaker,  nor  any 
other  sort  of  public  speaker.  Outside  of  Methodist  class  meeting 
and  similar  small  occasions  this  is  about  the  third  public  address  of 
my  life. 

I  made  the  first  many  years  ago  on  Arbor  Day  when  my  school 
class  planted  a  vine  by  the  school  building  and  elected  me  to  make 
the  speech  of  the  occasion.  The  vine  forthwith  lay  down  and  died ! 

Last  June  at  Indiana  University's  conference  on  the  question, 
"Shall  a  Constitutional  Convention  be  called  in  Indiana?"  I 
made  my  second  public  address  and  favored  the  convention.  Alas, 
like  the  vine,  the  convention  proposition,  on  election  day,  lay  down 
and  died ! 

I  shall  now  proceed  to  make  the  third  public  address  of  my  life 
and  discuss  the  present  defective  Indiana  tax  system.  In  view  of 
the  apparently  murderous  effect  of  my  previous  attempts  at  public 
speech,  may  we  dare  to  hope  that  the  present  form  of  the  Indiana 
tax  system  will  also  forthwith  lie  down  and  die  ?  If  such  shall  be 
its  fate,  we  think  the  public  comment  will  be  like  Malcolm's  on  the 
thane  of  Cawdor : 

....     Nothing  in  his  life 
Became  him  like  the  leaving  it. 

I  well  remember  my  first  encounter  as  a  citizen  of  Indiana  with 
our  tax  system.  A  few  days  after  my  twenty-first  birthday  while 


TAXATION   IN   INDIANA  79 

still  a  college  student,  a  very  courteous  elderly  gentleman  rapped 
on  the  door  of  my  student 's  room  and,  on  being  invited  in,  produced 
a  long  black  book.  Having  stated  that  he  was  the  tax  assessor,  he 
inquired  as  to  iny  assets.  This  being  my  first  experience  of  the 
sort  and  having  been  properly  reared  as  a  patriot  and  honest  man, 
I  told  the  truth,  nothing  but  the  truth,  and  the  whole  truth.  I  said 
tlmt  I  had  no  assets  but  the  library  and  furniture  visible  in  the  room 
and  some  mortgages.  He  inquired  the  amount  of  the  mortgages. 
My  guardian  had  just  recently  turned  over  to  me  my  little  patri- 
mony entirely  in  the  form  of  small  mortgages  on  Indianapolis  real 
estate.  Accordingly  I  told  the  assessor  that  the  loans  totalled 
$10,000.  Whereupon  he  wrote  in  his  long  black  book  and  bade  me 
a  pleasant  good-day.  I  accepted  the  matter  as  one  of  the  inevitabil- 
ities of  life  and  gave  it  no  further  attention.  Quite  a  while  after- 
wards a  friend  made  the  amusing  remark  to  me, '  1 1  hear  you  are  one 
of  the  richest  men  in  Putnam  county. "  "  That  is  news, 7 '  I  replied, 
* '  Where  did  you  hear  that  astonishing  yarn  ? "  "  Why,  Miss  So-and- 
So,  who  is  the  daughter  of  Mr.  So-and-So,  the  assessor,  says  that  in 
copying  her  father's  report  for  him  she  found  your  assessment  was 
the  highest  he  had."  "Well,"  I  said,  "there  must  be  a  large  num- 
ber of  wealthy  tax-dodgers  in  Putnam  county. ' '  That  was  twenty- 
one  years  ago,  but  from  that  day  to  this  I  have  been  convinced  that 
the  personal  property  tax  is  a  failure  and  a  change  is  necessary. 
After  previous  temporary  sojourns  in  the  country,  about  eleven 
years  ago  I  purchased  a  small  farm  a  few  miles  from  Greencastle  in 
Putnam  county,  and  because  of  disabilities  from  ill  health  became 
permanently  a  countryman.  This  brought  prominently  to  view  the 
fact  that  under  the  listing  system  of  the  general  property  tax  there 
is  no  escape  for  the  average  farmer's  assets,  which  are  all  visible, 
tangible,  taxable  property  such  as  land,  grain,  live-stock,  buildings, 
et  cetera.  Except  as  assessors  disobey  the  State's  constitution  and 
laws  the  individual  farmer  must  inevitably,  in  proportion  to  his 
assets,  pay  a  larger  proportion  of  taxation  than  the  city  capitalists, 
many  of  whose  assets  or  investments  nobody  except  the  investor 
knows  of.  Taxation  returns  depend  entirely  on  their  owner's 
ethics  or  else  on  his  fears  of  possible  discovery.  Experience  shows 
that  neither  his  fears  nor  his  ethics,  alone  or  combined,  are  sufficient 
to  provide  the  State  with  correct  general  property  tax  statements. 
The  thing  to  do,  therefore,  is  to  repeal  the  present  general  property 
tax  and  adopt  an  entirely  different  system  of  taxation.  That  this 
position  is  fully  sustained  by  all  the  leading  thinkers  is  shown  by 


80  INDIANA   UNIVERSITY 

the  following  quotations   from  the   standard   authorities  on  the 
subject. 

In  discussing  tax  reform  before  the  American  Economic  Asso- 
ciation Prof.  S.  M.  Dick  said : 

All  writers  and  teachers  dealing  with  the  subject  of  taxation,  so  far  as 
I  know,  are  agreed  that  the  American  taxing  system  is  faulty  and  ought  to 
be  reformed.  It  puts  a  premium  on  dishonesty,  is  exceedingly  complex, 
tends  to  widen  the  breach  in  society.  There  are  two  reasons  why  reform 
is  difficult :  The  rich  men  do  not  want  it,  and  the  farmers  do  not  want  it. 
If  taxation  were  on  real  estate  alone  in  Ohio,  those  counties  most  given  to 
farming  would  save  per  annum  from  15  to  20  per  cent  of  all  the  tax  now 
paid  for  State  purposes.  Had  real  estate  alone  been  taxed  in  1891  and  had 
the  same  amount  of  tax  been  required  for  State  purposes  that  was 
demanded,  the  four  counties  containing  the  four  largest  cities  in  Ohio 
would  have  paid  $147,889.30  more  than  they  did  pay.  The  farm  lands  in 
those  counties  would  have  saved  a  large  per  cent  of  their  tax.  Ohio 
farmers  would  be  largely  the  gainers  if  personal  property  were  exempt 
from  taxation. 

Prof.  E.  R.  A.  Seligman  of  Columbia  University  in  discussing 
Prof.  Dick 's  paper  said : 

The  thought  is  perhaps  in  harmony  with  that  of  a  large  number  of  tax 
reformers,  that  the  best  basis  for  local  taxation  would  be  real  property. 
The  plan  has  many  advantages  of  ease  and  convenience  of  collection  and  of 
non-inducement  to  fraud.  As  real  property  has  a  large  share  of  the  benefits 
of  State  and  municipal  protection  it  ought  to  bear  a  large  share  of  the 
taxation.  It  is  hopeless  to  suppose  that  the  farmers  of  this  country  will 
ever  consent  to  abolish  the  tax  on  personal  property  unless  we  replace  it  by 
something  which  will  reach  the  bondholders  and  tax  the  holders  of  millions 
who  did  not  get  their  wealth  from  real  estate. 

The  personal  property  tax  has  been  investigated  times  without 
number,  with  the  same  conclusion — that  it  is  wrong. 

The  matter  is  summed  up  in  complete  finality  by  the  report  of 
the  special  Committee  on  the  Causes  of  the  Failure  of  the  General 
Property  Tax  made  to  the  Fourth  International  Tax  Conference 
on  Local  and  State  Taxation  held  at  Milwaukee,  Wisconsin,  in  1910. 
I  quote  from  that  report : 

That  the  general  property  tax  has  broken  down  in  administration  may 
be  regarded  as  an  established  fact.  It  has  not  been  more  successful  under 
strict  administration  than  where  the  administration  is  lax.  In  the  States 
where  its  administration  has  been  the  most  stringent,  the  tendency  of 
public  opinion  and  legislation  is  not  towards  still  more  stringent  adminis- 
tration but  towards  a  modification  of  the  system;  the  States  which  have 
modified  or  abandoned  the  general  property  tax  show  no  intention  of 
returning  to  it ;  in  the  States  where  the  general  property  tax  is  required  by 
constitutional  provisions,  there  is  a  growing  demand  for  repeal  of  such 


TAXATION   IN   INDIANA  81 

provisions;  the  failure  of  the  general  property  tax  is  due  to  the  inherent 
defects  of  the  theory;  even  measurably  fair  and  effective  administration 
is  unattainable  and  all  attempts  to  strengthen  such  administration  serve 
simply  to  accentuate  and  to  prolong  the  inequalities  and  unjust  operation 
of  the  system. 

I  happened  to  drive  into  town  last  September  as  the  schools  and 
the  college  were  opening  for  the  fall  term.  In  glancing  over  the 
piles  of  new  textbooks,  I  found  a  large  volume  entitled,  Principles 
of  Economics  (1913)  by  Prof.  H.  R.  Seager  of  Columbia  University. 
I  concluded  that  I  did  not  want  those  college  boys  to  get  so  far 
ahead  of  me  that  I  could  not  tell  in  what  direction  the  world  was 
headed,  so  I  invested  two  dollars  and  fifty  cents  in  a  copy  of  the 
sum  total  of  the  latest  authoritative  statement  of  human  knowledge 
concerning  economics.  When  I  examined  the  parts  dealing  with 
taxation  I  found  the  following  statements: 

The  general  property  tax  is  an  institution  peculiar  to  the  United  States. 
Real  estate,  which  includes  with  the  land  all  buildings  that  may  have 
been  erected  upon  it,  is  easily  assessed,  and  since  it  cannot  be  removed, 
may  easily  be  seized  as  security  that  the  tax  be  paid.  Personal  property, 
on  the  other  hand,  cannot  be  accurately  assessed  and  escapes  in  large 
measure  its  share  of  taxation.  The  results  that  follow  easy  evasion  of  the 
personal  property  tax  have  become  notorious.  In  those  States  where  per- 
sonal property  is  increasing  most  rapidly  the  amount  that  is  taxed  actually 
diminishes.  In  California  between  1872  and  1887,  while  the  assessed  value 
of  real  estate  increased  from  $417,000,000  to  $791,000,000,  the  assessed 
value  of  personal  property  decreased  from  $220,000,000  to  $164,000,000 !  In 
New  York,  by  1875  the  value  of  real  estate  exceeded  $2,000,000,000,  the 
value  of  personalty  only  $358,000,000.  In  1886  the  $3,000,000,000  mark  for 
the  value  of  real  estate  was  passed  but  in  that  year  the  value  of  personalty 
was  only  $336,000,000  or  actually  less  than  it  had  been  eleven  years  before ! 
The  tendency  for  the  assessed  value  of  real  estate  to  advance  and  for  that 
of  personalty  to  lag  behind  has  continued  since  until  at  present,  in  the 
richest  State  in  the  Union  whose  wealth  consists  very  largely  of  corporate 
securities,  personal  property  represents  less  than  ten  per  cent  and  real 
estate  more  than  ninety  per  cent  of  the  property  assessed  for  the  general 
property  tax.  The  personal  property  tax  has  been  justly  described  as 
"debauching  to  the  conscience,  subversive  of  the  public  morals,  a  school  for 
perjury  promoted  by  law."  It  falls  only  on  those  who  are  too  scrupulous 
to  evade  it.  The  general  property  tax  becomes  in  consequence  a  tax  on 
real  estate,  upon  certain  kinds  of  personal  property,  and  upon  conscien- 
tious owners.  We  must  describe  it  as  a  tax  on  land,  on  buildings,  on 
certain  sorts  of  personal  property,  and  on  certain  sorts  of  owners. 

I  would  call  attention  to  the  fact  that  Prof.  Seager 's  "certain 
sorts  of  personal  property ' '  are  the  visible  sorts,  such  as  live  stock, 
grain,  machinery,  household  goods,  and  the  like,  that  farmers  own. 

6—2902 


82  INDIANA   UNIVERSITY 

Surely  every  farmer  with  ordinary  horse-sense  who  reads  the  fore- 
going undisputable  facts  and  sees  that  the  present  general  property 
listing  system  means  taxation  nine-tenths  on  real  estate  and  only 
one-tenth  on  personal  property,  I  say  surely  every  common-sense 
farmer  will  drop  immediately  any  misinformed,  self-injuring  op- 
position to  the  repeal  of  the  present  general  property  tax  system, 
and  will  follow  the  leaders  of  farm  thought  and  the  leaders  of 
economic  thought  in  supporting  its  repeal.  If  in  New  York  nine- 
tenths  is  already  on  real  estate  and  the  proportion  on  real  estate  is 
yearly  increasing,  let  us  frankly  acknowledge  that  since  everybody 
else  is  paying  taxes  only  on  real  estate,  farmers  are  going  to  do  the 
same  thing  and  quit  paying  any  taxes  on  personal  property  of  all 
forms,  of  course  repealing  first  our  present  unfair  general  property 
tax  system.  Prof.  Seager-says: 

The  most  important  reform  that  is  needed  in  connection  with  State 
taxation  is  the  abolition  of  the  discredited  general  property  tax  as  a 
source  of  State  revenue.  The  part  which  applies  to  real  estate  ought  to  be 
assigned  to  the  local  governments.  To  continue  to  attempt  to  tax  personal 
property  is  to  bring  the  whole  system  of  taxation  into  disrepute.  In 
place  of  the  general  property  tax  three  fruitful  sources  of  revenue  are  open 
to  State  governments — inheritance,  corporation,  and  license  taxes. 

Notice  Prof.  Seager's  exterminating,  annihilating  word,  aboli- 
tion. Let  us  all  become  abolitionists  of  the  personal  property  tax. 

The  Master  of  the  Ohio  State  Grange  reported  that  the  amount 
of  assessed  personal  property  in  Ohio,  instead  of  increasing  from 
year  to  year  as  it  should,  had,  by  refusals  to  report  and  evasions, 
actually  decreased.  The  quotation  from  Prof.  Seager  reported  that 
the  same  thing  had  happened  in  both  California  and  New  York 
States.  And  now,  showing  the  same  thing  in  Indiana,  comes  the 
1914  report  of  our  Indiana  State  Board  of  Tax  Commissioners, 
made  public  in  the  last  few  days,  which  says  that  non-corporate 
personal  property  assessed  during  the  year  showed  a  loss  in  Indiana 
of  $5,404,747.  The  Board  says  "We  cannot  believe  that  this  class 
of  property  declined  in  value  during  this  period.  .  .  .  The 
amount  sequestered  and  hidden  is  appalling."  In  the  very  same 
newspaper  that  prints  the  extracts  from  the  Commissioner's  report 
we  find  in  another  column  a  news  item  saying  that  the  Marion 
County  Commissioners  have  had  a  tax-ferret  contract  for  a  num- 
ber of  years  and  have  awarded  a  contract  for  1915,  the  ferret  to 
receive  25  per  cent  of  all  omitted  taxes  that  he  finds.  Other  coun- 
ties have  tried  the  same  plan,  but  yet  in  spite  of  such  contracts  the 
State  Commissioners  hand  in  their  November,  1914,  report  of  fail- 


TAXATION   IN   INDIANA  83 

ure  to  secure  taxes  on  hidden  personal  property.  But  meanwhile 
the  farmers  keep  right  along  paying  their  personal  property  tax 
because  their  personal  property  is  visible.  As  soon  as  the  farmers 
of  Indiana  learn  the  facts,  nobody  will  ever  again  have  a  chance  to 
say  that  the  farmers  are  the  obstacle  to  repealing  the  personal  prop- 
erty tax.  During  the  month  of  November  just  closed  the  news- 
papers reported  affidavits  filed  by  John  D.  Rockefeller  at  Cleveland 
fighting  against  an  assessment  of  $311,000,000  on  stocks  and  bonds 
and  other  assessments,  one  being  on  a  picture  for  which  he  paid 
$15,250  twenty-seven  years  ago.  Prices  are  higher  now  than  then, 
and,  furthermore,  art  masterpieces  increase  in  value  with  age,  but 
Mr.  Rockefeller  asks  to  be  assessed  only  $2,500  on  his  picture,  al- 
though it  was  actually  insured  last  February  for  $75,000.  Does 
anybody  suppose  that  if  I  had  a  herd  of  hogs  or  cribs  of  corn  in- 
sured for  $75,000  Warren  township 's  assessor  would  let  me  off  with 
an  assessment  of  $5,000?  And  remember  it  was  only  by  accident 
or  by  tax-ferret  action  that  this  $75,000  item  was  discovered,  not  by 
any  tax-sheet  return  of  the  owner  of  the  picture.  But  every  tele- 
phone box,  sewing  machine,  tin  pail,  chicken,  and  the  family  Bible 
in  a  farmer 's  house  must  pay  on  its  officially  assessed  value.  There- 
fore, every  farmer  should  fight  for  the  abolition  of  the  personal 
property  tax.  The  rich  men  escape  entirely  or  else  pay  ridiculously 
inadequate  taxes.  Why  should  we  farmers  continue  to  pay  on  per- 
sonal property?  Because  our  assets  can  be  seized  while  Rocke- 
feller's bonds  cannot  be  seized  if  taken  to  another  State.  Our  only 
chance  of  equality  is  to  vote  out  of  existence  the  personal  property 
tax.  Another  November  press  item  was  reported  from  Chicago  say- 
ing, "State's  Attorney  Hoyne,  charging  $50,000,000  have  been  stol- 
en from  Cook  county  by  tax-dodgers,  has  instituted  county  court 
proceedings  which  he  said  eventually  will  include  fifteen  thousand 
people."  The  chairman  of  the  board  of  review,  Roy  0.  West,  ob- 
jects, saying  that  enforcement  of  the  personal  property  tax  in 
Chicago  will  tax  not  only  the  rich  but  also  "the  washerwoman's  tub 
and  furniture,  the  household  sugar  and  kitchen  supplies,  the  coal 
in  the  bin,  the  family  dishes,  dresses,  hats,  clothing,  sewing  machine, 
pictures,  Bible,  school-books,  the  mechanic's  tools,  the  widow's 
award  and  the  claim  for  damages  accruing  to  her  orphan  children ; 
will  tax  all  savings-bank  accounts,  accrued  value  of  life-insurance 
policies,  and  certain  building  association  stocks."  As  the  farmers' 
representative  I  rise  to  inquire  if  these  things  are  not  to  be  taxed 
in  the  city  of  Chicago  why  tax  them  in  the  country  on  our  farms? 
Why  should  not  farmers  demand  the  repeal  of  the  personal  proper- 


84  INDIANA   UNIVERSITY 

ty  tax  and  cease  to  be  the  sole  victims  ?  Only  this  past  week,  at  the 
Indianapolis  chamber  of  commerce  meeting,  former  State  Tax  Com- 
missioner Fred  Sims  said, ' 1 1  have  little  doubt  that  the  actual  value 
of  the  sequestered  personal  property  in  Indiana  is  more  than  the 
value  of  all  of  the  assessed  values  of  the  State.  It  is  an  outrage, 
but  how  impractical  and  impossible  it  is  to  enforce  the  laws  against 
these  intangibles  that  are  so  easily  evasive.  If  the  personal  proper- 
ty tax  laws  were  strictly  enforced  the  effect  would  be  paralyzing." 

When  a  thing  such  as  the  general  property  tax  is  not  enforced, 
when  such  a  thing  cannot  be  enforced,  when  the  thing  ought  not  to 
be  enforced,  common  sense  demands  repeal  of  that  thing,  repeal  of 
the  general  property  tax. 

When,  in  addition  to  these  reasons  for  repeal,  we  find  that  its 
present  condition  of  partial  enforcement  means  merely  enforce- 
ment chiefly  on  the  farmer  and  the  small  home-owning  city  laborer, 
and  not  on  the  rich  capitalist,  we  conclude  it  should  be  abolished 
through  an  active  fight  made  against  the  general  property  tax  by 
the  farmers  and  laborers,  and  we  find  that  the  best  farm  leaders, 
as  the  following  quotations  show,  favor  the  immediate  abolition  of  a 
tax  that  taxes  chiefly  the  poor  man  and  the  man  of  moderate  means, 
while  the  rich  go  free. 

Mr.  F.  A.  Derthick,  the  Master  of  the  Ohio  State  Grange,  or 
Patrons  of  Husbandry,  at  the  Second  International  Conference  on 
Taxation  held  in  Canada  at  Toronto,  Ontario,  in  October,  1908, 
said: 

The  millionaire's  dollar  is  not  now  directly  touched  at  all,  and  the 
washerwoman,  the  farmer,  the  business  man,  and  the  home-owner  pay  it 
all.  The  belief 'that  taxes  should  be  at  a  uniform  rate  upon  all  property 
at  its  true  value  in  money  sounds  fair.  •  But  experience  and  all  history 
prove  that  its  fairness  begins  and  ends  in  sound.  So  soon  as  property 
became  diversified,  yielding  different  incomes,  giving  rise  to  intangible 
property,  the  general  property  tax  became  unsound  from  an  economic 
standpoint  and  unjust  as  between  individuals.  It  was  not  a  correct  prin- 
ciple and  it  is  entirely  false  now.  It  is  false  economically  and  in  conse- 
quence owners  of  intangible  property  have  in  an  ever-increasing  measure 
withheld  it  from  taxation.  This  results  in  gross  injustice  to  owners  of 
visible  property,  who,  not  being  able  to  conceal  their  wealth,  must  pay  any 
legal  tax  laid  upon  it.  Because  of  this  economic  fallacy  there  has  grad- 
ually come  about  an  unfortunate  as  well  as  a  disastrous  classification  of 
property-holders  in  every  State  where  the  general  property  tax  is  in  opera- 
tion. Upon  one  side  are  the  holders  of  our  intangible  wealth  who  in  large 
proportion  resort  successfully  to  every  device  to  withhold  their  property, 
even  though  to  do  so  always  involves  perjury.  Upon  the  other  side  of  the 
line  are  the  holders  of  visible  property,  compelled  by  the  character  of  their 


TAXATION   IN   INDIANA  85 

investment  to  bear  the  burdens  of  society  and  the  government.  In  this  tax- 
ridden  class  stands  the  farmer,  perhaps  suffering  most  of  all  from  the 
injustice  of  a  uniform  rate.  The  farmer  more  nearly  than  any  class  of 
taxpayers  has  his  property  invested  in  things  visible,  in  stock,  herds,  imple- 
ments, lands,  and  improvements.  In  September,  1906,  Governor  Harris 
appointed  a  nonpartisan  tax  commission  to  investigate  the  laws  of  Ohio. 
It  was  found  the  value  of  all  intangible  property  returned  was  $34,000,000 
less  in  1906  than  in  1890  though  everybody  knew  that  such  property  had 
quadrupled  during  the  sixteen  years  intervening.  The  commission  reported 
that  our  entire  tax  system  was  honeycombed  by  evasions  and  injustices,  both 
in  the  field  of  tangible  and  intangible  property ;  that  a  general  property  tax 
was  non-productive  of  results,  tending  to  immorality,  impossible  of  enforce- 
ment, and  unjust  and  destructive  to  progress  if  its  enforcement  were 
possible.  They  recommended  that  the  uniform  rate  be  eliminated  from  the 
State  constitution  and  that  the  people  through  their  legislature  be  left  a 
free  hand  to  work  out  a  tax  system  suited  to  the  conditions  now  confronting 
them.  This  report  was  warmly  endorsed  by  Governor  Harris  and  approved 
by  the  General  Assembly  by  a  decisive  vote.  About  one-half  the  property 
of  the  State  is  withheld  from  taxation,  leaving  the  burden  to  be  borne  by 
the  remaining  half.  A  low  rate  of  taxation  on  intangible  property  pro- 
duces a  larger  revenue  in  States  that  have  adopted  the  plan.  We  have 
sought  for  years  to  reach  this  class  of  property  for  taxation  and  signally 
failed,  with  the  situation  growing  worse  as  taxpayers  become  more  adept 
in  evading  payment. 

I  have  given  this  lengthy  quotation  because  the  official  character 
of  Mr.  Derthick,  as  head  of  Ohio's  Grange  and  as  the  farmer's 
representative  at  the  Second  International  Tax  Conference  in  1908, 
makes  it  plain  that  my  own  protest  against  the  personal  property 
tax  is  in  harmony  with  the  best  farmer  sentiment.  Those  who  op- 
pose any  change  in  present  laws  have  never  looked  up  the  figures 
and  seen  that  the  personal  property  tax  hits  the  common  farmer 
and  city  laborer  out  of  all  proportion  to  the  payments  made  by  men 
of  wealth  whose  personal  property  is  assessed  too  low  when  known 
and  usually  is  not  even  known.  In  order  to  leave  no  question  that 
our  best  agricultural  leaders  oppose  the  present  general  property 
tax  system,  I  offer  additional  quotations.  At  the  1907  First  Na- 
tional Conference  on  Taxation  N.  J.  Bachelder,  the  Master  of  the 
United  States  National  Grange,  said: 

The  primitive  idea  that  every  form  of  property  should  be  taxed  equally 
appears  to  be  gradually  giving  away.  The  methods  of  taxation  so  long  in 
vogue  have  been  largely  matters  of  guess-work,  and  it  is  time  that  our 
systems  of  local  and  State  taxation  should  be  reformed.  Farm  products 
should  be  exempt  from  taxation.  There  is  undoubtedly  a  strong  trend 
toward  the  total  exemption  from  taxation  of  all  forms  of  personal  prop- 
erty. It  is  certain  that  the  burdens  of  the  personal  property  tax  laws  fall 
far  more  heavily  on  the  rural  communities  than  the  cities. 


86  INDIANA   UNIVERSITY 

In  1910  the  forty-fourth  annual  session  of  the  National  Grange 
adopted  in  the  report  of  the  committee  on  taxation  the  following 
statements : 

There  seems  to  be  a  general  impression  among  the  people,  and  espe- 
cially among  those  who  have  not  given  the  subject  considerable  study,  that 
a  general  property  tax  is  necessary  in  order  to  make  rich  men  pay  their 
share  of  the  taxes.  This  law  does  not  meet  the  requirements.  One  of  the 
richest  women  in  the  United  States  has  a  summer  home  in  Vermont  and 
claims  that  State  as  her  residence.  From  her  millions  of  personal  prop- 
erty, mostly  in  intangible  mortgages,  how  much  does  she  pay  in  taxes? 
Nothing.  The  general  property  tax  is  a  failure  in  practice.  We  favor  a 
graduated  income  tax.  The  inheritance  tax  should  be  reserved  for  the  use 
of  the  States. 

Professor  C.  S.  Walker  of  the  Massachusetts  Agricultural  Col- 
lege in  the  Andover  Review  says : 

It  is  not  strange  that  the  city  should  grow  richer  and  richer  and  more 
populous  and  crowded.  The  city  is  the  place  where  the  burdens  of  taxation 
dimmish  in  proportion  to  the  benefits  enjoyed.  It  is  an  acknowledged  fact 
that  the  great  wealth  of  city  fortunes  easily  evades  taxation  and  contributes 
only  so  much  as  the  owners  choose  to  appropriate. 

Turning  to  our  farm  papers  we  find  in  Successful  Farming 
with  its  claimed  circulation  of  700,000,  perhaps  one  of  the  four 
leading  general  farm  papers  of  the  United  States,  in  its  February, 
1912,  issue  the  following  editorial  statement: 

The  folly  of  trying  to  raise  money  by  taxing  personal  property !  The 
rich  escape  and  the  poor  man  pays  the  running  expenses  of  the  government. 
The  farmer  gets  taxed  because  his  wealth  cannot  be  hidden.  The  rich  city 
man  escapes  because  his  money  investments  can  be  hidden.  The  executor 
of  the  estate  of  John  W.  Gates  with  personal  property  valued  at  $2,000,000 
but  assessed  at  only  $600,000  obtained  a  reduction  from  even  that  figure  to 
only  $300,000.  Alfred  G.  Vanderbilt  called  at  the  department  of  taxes  and 
swore  down  an  assessment  of  $500,000  on  personal  property  to  only  $1,000 ! 
In  New  Jersey,  Governor  Griggs's  commission  reported  in  1897  that  the 
300,000  population  of  Hudson  and  Camden,  the  two  counties  containing  the 
richest  and  most  extensive  manufacturing  on  the  seaboard,  paid  $846,652 
less  than  the  60,000  farming  population  of  Hunterdon  and  Salem  on  per- 
sonalty assessment!  And  these  are  the  people,  these  overrich  citizens  who 
come  and  have  their  personal  taxes  reduced  when  they  are  far  too  low  in 
the  first  place,  and  the  farmers  have  to  make  up  for  it  so  as  to  keep  up  the 
running  expenses  of  the  government. 

In  the  September,  1914,  issue  we  find  another  editorial  on 
"Face  Taxation  Facts"  saying: 

We  have  tried  to  show  that  our  present  method  of  taxation  is  very 
faulty.  Here  is  another  instance.  The  Executive  Council  of  Iowa  finds 


TAXATION   IN    INDIANA  87 

that  yearling  colts  in  Plymouth  county  are  assessed  at  $32.32,  while  in 
Keokuk  county  at  $66.04 ;  mules  in  Green  county  at  $60,  in  Keokuk  county 
at  $127.56;  swine  over  six  months  old  in  Plymouth  county  at  $4,  in  Lynn 
county  at  $12.70.  As  long  as  the  personal  tax  exists  let  us  have  an  equitable 
one.  Don't  be  too  sure  that  the  elimination  of  personal  properly  taxes 
would  be  a  calamity  as  some  proclaim. 

In  view  of  all  the  facts  and  quotations  cited,  as  the  farmers' 
representative  in  this  tax  conference,  I  wish  to  submit  the  follow- 
ing resolutions  and  respectfully  request  that  they  be  referred  to 
a  committee  on  resolutions,  consisting  of  Prof.  William  A.  Rawles 
and  Mr.  Fred  Sims,  with  the  request  that  they  report  at  tomorrow's 
session  on  these  resolutions  and  on  any  others  which  any  one  sees 
fit  to  introduce  for  discussion : 

Resolved,  That  the  discredited  general  property  tax  should  be  abol- 
ished, and  we  hereby  respectfully  request  the  1915  session  of  the  Indiana 
legislature  to  take  such  action  concerning  our  laws  and  constitution  as  may 
be  necessary  to  do  away  entirely  with  the  general  property  tax. 

Resolved,  That  the  Indiana  State  Tax  Association  secretary  shall  open 
a  roll  to  be  known  as  the  Roll  of  Abolitionists  and  that  every  person  in 
Indiana  in  favor  of  abolishing  the  general  property  tax  be  invited  to  have 
his  name  recorded  as  an  abolitionist. 

Resolved,  That  we  call  the  attention  of  the  citizens  of  Indiana  to  (1) 
the  necessity  of  retrenchment  in  expenses,  and  to  (2)  the  fact  that  the 
general  trend  in  devising  modern  systems  of  taxation  is  towards  placing 
by  far  the  main  assessments  on  land  values,  merely  supplemented  by 
inheritance,  registration,  corporation,  license,  income,  and  improvements 
taxes,  and  we  respectfully  solicit  that  they  interest  themselves  in  these 
subjects  and  prepare  by  votes  and  advice  to  support  the  movement  to 
abolish  the  general  property  tax  and  substitute  a  modern  system  of  taxa- 
tion in  Indiana. 

The  general  property  tax  is  not  the  only  part  of  Indiana's 
tax  system  that  should  be  abolished.  That  part  of  our  State's  tax 
system  which  deals  with  business  licenses  provides  for  licenses  to 
manufacture  and  sell  intoxicating  liquors.  We  do  not  need  this 
revenue.  We  do  not  want  this  revenue.  The  Supreme  Court  of 
Indiana  in  the  case  of  Emerich  vs.  City  of  Indianapolis  said: 
"The  theory  of  legislation  upon  the  subject  is  that  the  business 
is  one  that  requires  restraint,  because  it  is  harmful  to  society." 
The  Supreme  Court  of  Indiana  in  the  case  of  Haggart  vs.  Stehlin 
said  of  liquor  selling:  "Such  a  pursuit  is  harmful  to  the  com- 
munity." If  it  is  harmful,  it  should  not  be  taxed  but  be  exter- 
minated. The  farmers  of  Indiana  believe  this.  They  have  passed 
public  resolutions  to  this  effect  so  often  that  everybody  knows  their 
sentiments.  And  when  the  last  Republican  legislature  that  we  had 


88  INDIANA   UNIVERSITY 

in  Indiana  passed  the  initiative  and  referendum  liquor  law,  at 
Governor  Hanly's  request,  the  farmers  by  means  of  the  initiative 
and  referendum  proceeded  to  abolish  all  liquor  taxes  in  the  majority 
of  Indiana's  counties  by  abolishing  the  saloons.  The  liquor  tax  has 
already  largely  gone.  The  remaining  receipts  from  liquor  taxes 
must  cease.  They  are  going  to  cease  and  this  tax  association  must 
base  its  plans  and  recommendations  for  future  Indiana  taxation  on 
this  prospect  and  select  other  sources  of  government  income.  Pub- 
lic sentiment  is  crystallizing  into  action  the  cry  of  the  drunkard  in 
Othello: 

O,  God !  that  men  should  put  an  enemy  in  their  mouths,  to  steal  away 
their  brains!  that  we  should,  with  joy,  pleasance,  revel  and  applause, 
transform  ourselves  into  beasts! 

Besides  repeal  of  the  general  property  tax  and  repeal  of  the 
liquor  tax  we  call  attention  to  the  fact  that  the  ''embattled  farm- 
ers ' '  of  Concord  and  Lexington  made  their  fight  against  ' '  taxation 
without  representation, ' '  and  therefore  we  demand  that  the  woman 
who  milks  the  cow  shall  have  as  much  to  say  about  the  taxes  on  that 
cow  as  has  the  man  who  drinks  the  milk!  The  stand  of  the  farm 
ers  in  favor  of  woman  suffrage  is  well  known,  the  suffragists  always 
looking  to  the  rural  districts  to  roll  up  a  favorable  vote  that  will 
overcome  the  adverse  city  majorities  under  the  control  of  political 
party -machine  bosses  and  of  the  liquorites,  both  of  which  classes 
look  with  dismay  upon  the  advent  of  the  broomstick  in  politics. 
There  are  various  other  reforms  in  taxation  that  the  farmers  desire. 
They  want  salaries  cut  down.  We  know  this  both  from  personal 
conversation  with  neighbors  and  also 'by  examination  of  the  initia- 
tive and  referendum  election  returns  in  various  States.  Farmers 
are  in  a  minority  in  legislatures  and  have  no  influence  in  statehouse 
halls  whenever  the  interests  of  the  machine  and  its  salary-grabbers 
conflict  with  farmers'  ideas.  But  in  the  initiative  and  referendum 
the  farmer  comes  forth  in  the  full  rights  of  an  American  citizen 
with  an  effective  vote,  a  free  vote,  a  direct,  final,  and  determining 
vote,  and  is  entitled  to  as  large  a  number  of  votes  as  there  are  farm- 
ers of  voting  age.  The  initiative  and  referendum  restores  the 
farmers  and  laboring  men  to  their  proper  political  influence.  And 
the  initiative  and  referendum  records  show  that  the  voters  vote 
against  statutes  increasing  salaries  or  providing  for  other  doubtful 
expenses. 

There  seems  to  be  still  another  tax  reform  the  farmers  are  tak- 
ing up,  namely,  the  taxation  solely  of  land  values  and  the  removal 


TAXATION   IN   INDIANA  89 

of  improvements  from  taxation.  The  land  value  tax  seems  to  be 
the  final  goal  towards  which  the  main  systems  of  assessments  of 
taxation  are  already  tending.  It  would  tend  to  make  unused,  un- 
improved, farm  lands  more  freely  offered  for  sale  at  lower  prices 
and  thus  give  working  farmers  a  better  chance  to  secure  a  home  and 
make  a  permanent  start  in  their  life  work  on  their  own  property. 
Under  the  name  of  single  tax  this  reform  is  in  some  quarters  arous- 
ing strong  opposition,  as  is  to  be  expected  concerning  any  new  pro- 
posal, and  in  other  quarters  is  arousing  even  more  enthusiastic  sup- 
port, so  that  the  movement  is  growing  in  the  number  of  its  adher- 
ents. That  it  is  being  adopted  in  rural  thought  is  plain  to  me  for 
I  have  been  surprised  at  receiving  letters  favorable  to  it  from  both 
the  plain  farmer  and  the  farm  editors.  Never  having  had  occasion 
to  deal  with  the  movement,  I  was  surprised  to  receive  recently 
from  one  of  our  most  prominent  eastern  farm  editors  a  letter  advis- 
ing me  to  become  an  adherent  of  the  single  tax  system.  And  when 
notified  to  prepare  this  afternoon 's  remarks  I  wrote  a  western  farm 
editor  to  ask  if  he  had  any  suggestions.  In  reply  I  was  surprised 
to  receive  a  copy  of  the  September,  1914,  issue  of  Carlson's  Rural 
Review  published  at  Norfolk,  Nebraska,  containing  an  interesting 
article  on  the  ''Single  Tax  as  Applied  to  Farmers,"  showing  that 
it  would  greatly  benefit  owners  of  farms  who  live  on  their  farms. 
To  prove  it  he  gives  a  list  of  exact  county  records  of  individual 
farmers  showing  their  taxation  amounts  under  the  present  system 
and  under  the  proposed  single  tax.  The  Equitable  Taxation  League 
of  Missouri  has  also  printed  a  pamphlet  on  Taxation  and  the  Farm- 
er which  gives  complete  taxation  records  under  the  present  system 
and  under  the  proposed  land  value  system  for  all  the  landowners 
of  Gasconade  township  in  Wright  county. 

A  recent  issue  of  a  Republican  daily  newspaper  that  I  take,  the 
excellent  South  Bend  Tribune,  contains  an  article  headed  "  Single 
Tax  Coming?"  To  show  the  evident  advance  of  the  movement,  it 
quotes  from  a  Michigan  paper  as  follows : 

With  Pittsburgh  and  Scranton,  Pa.,  and  Hudson,  Corpus  Christi,  and 
other  cities  in  Texas  moving  fcy  degrees  toward  the  untaxing  of  buildings 
and  improvements  and  increased  taxation  on  site  values;  with  Pueblo,  f'ol.. 
about  to  operate  under  an  out-and-out  single  tax  charter,  and  many  oth« -r 
cities  seriously  considering  a  shift  toward  land  value  taxation.  Uu*re  ix 
ample  justification  for  the  growing  optimism  of  single  taxers. 

Up  to  date  the  greatest  interest  in  this  modern  idea  of  taxation  has 
been  shown  in  our  cities,  and  it  is  perhaps  wise  to  put  the  idea  to  the  test 
of  trial  for  city  purposes  before  attempting  to  secure  its  adoption  for 
county  and  State  purposes. 


90  INDIANA   UNIVEKSITY 

Our  farmers  are  inclined  to  be  conservative  and  to  draw  conclusions 
slowly  from  the  experiments  of  their  more  impetuous  city  brothers.  When 
it  is  demonstrated  a  success  for  city  purposes,  the  farmers  will  not  be 
found  lagging  far  behind  their  city  brethren  in  trying  it  out. 

The  single  taxers  claim  that  it  will  reduce  the  farmers'  tax  levy,  as 
well  as  that  of  the  small  home  owner,  for  under  that  system  the  bulk  of  the 
taxes  will  be  secured  from  the  locations  where  land  values  are  the  highest — 
in  the  business  districts  of  the  cities. 

The  farmers  of  the  three  great  agricultural  provinces  of  the  Canadian 

"Northwest  have  become  accustomed  to  land  value  taxation,  and  are  reported 

to  be  so  well  pleased  with  it  that  they  would  not  sanction  a  change  back  to 

the  old  system,  whereby  buildings,  machinery,  stock,  and  improvements  are 

taxed. 

In  New  Zealand,  where  any  city  or  county  may  place  local  taxes  on 
unimproved  land  values  only,  the  system  has  grown  so  popular  that  it 
carried  in  22  out  of  24  districts  in  which  it  was  submitted  during  the  last 
year,  and  in  no  case  has  it  ever  been  repealed  after  once  being  adopted  and 
put  in  operation. 

Its  recent  partial  adoption  in  Britain  will  be  followed  by  a  broader 
application  of  it. 

Recently  on  its  editorial  page  the  Indianapolis  News  contained 
an  article  headed  "Single  Tax  in  New  York,"  of  which  the  first 
paragraph  is  as  follows: 

New  York  is  debating  the  single  tax  as  a  legislative  question.  It  has 
been  proposed  to  change  the  system  of  taxation,  which  is  a  straight  tax  on 
land  and  improvements,  by  substituting  the  half  tax  or  the  single  tax  and 
adding  the  increment  tax.  "Considering  that  95  per  cent  of  the  tax 
receipts  are  derived  from  real  estate,"  says  a  writer  in  the  New  York 
Times,  "and  that  assessed  valuations  of  real  estate  in  the  city  have  arisen 
from  $2,463,135,687  to  $8,006,647,861  in  1913,  in  an  endeavor  to  provide 
funds,  the  application  of  new  tax  theories  tending  to  increase  the  burden 
upon  this  class  of  property  should  be  most  carefully  analyzed." 

That  this  movement  has  the  endorsement  of  strong  men  is  shown 
by  such  public  supporters  as  Prof.  L.  J.  Johnson,  Surgeon-General 
Gorgas,  Bishop  Charles  D.  Williams,  Frederick  C.  Howe,  Joseph 
Dana  Miller,  Louis  L.  Post,  arid  other  prominent  men.  It  is  plainly 
a  movement  that  can  neither  be  ignored  nor  howled  down  with  the 
usual  epithets  commonly  hurled  at  every  man  who  proposes  some- 
thing new.  I  am  not  here  with  the  intention  of  offering  a  decision 
on  this  matter,  but  since  I  am  reporting  farmer  sentiments,  and  I 
have  found  among  farmers  this  sentiment  favoring  single  tax,  it 
must  be  reported  as  a  fact  whatever  one  may  think  of  it.  It  seems 
to  me  in  view  of  the  evident  intelligence  and  high  character  of  its 
supporters,  we  ought  to  give  the  subject  very  careful  and  respect- 
ful consideration,  remembering  always  it  is  a  tax  on  land  values, 
not  on  land  area.  The  value  of  a  city  lot  is  much  higher  than  the 


TAXATION   IN   INDIANA  91 

value  of  an  equal  amount  of  land  in  the  farming  section  and  will 
pay  more  taxes. 

I  have  tried  to  show  what  the  farmers  are  thinking  about.  I  do 
not  say  that  I  support  the  single  tax,  or  anything  of  that  kind,  but 
I  am  reporting  what  the  farmers  are  thinking  about.1 

SUMMARY  OF  THE  SECOND  SESSION 

DR.  WM.  A.  RAWLES,  Professor  of  Political  Economy  in  Indiana  University 
and  President  of  the  Indiana  State  Tax  Association 

The  first  thing  that  I  want  to  note  is  that  the  effect  of  a  high 
tax-rate  upon  loans  is  to  reduce  the  amount  of  funds  available  for 
the  purposes  of  investment;  and  it  does  this  for  two  reasons.  In 
the  first  place,  where  the  net  income  derived  from  an  investment  is 
four  or  three  or  two  per  cent,  or  even  less,  the  inducement  to  save 
is  weakened,  and  the  inducement  to  spend  is  strengthened  or  in- 
creased. In  the  second  place,  it  reduces  the  amount  of  available 
funds,  because  it  drives  capital  into  industries  in  other  States  where 
the  tax-rates  are  not  so  high,  or  it  drives  it  into  certain  industries 
in  which  the  margin  of  profit  is  exceedingly  high,  and  thus  we  have 
a  lopsided  development. 

Now  the  net  result  of  a  reduction  of  the  amount  of  loanable 
funds,  either  in  the  form  of  cash  capital  or  in  the  form  of  credit,  is 
a  higher  interest  rate,  because  the  law  of  supply  and  demand  holds 
in  the  lending  of  capital  as  it  does  in  the  fixing  of  the  prices  of  com- 
modities. If  you  lower  the  supply,  the  demand  remaining  the  same, 
you  will  have  an  increased  price,  or  an  increased  rate  of  interest; 
and  an  increased  rate  of  interest  has  the  effect  of  discouraging  in- 
dustry in  general.  It  prevents  the  development  of  farm  property. 
It  prevents  the  development  of  real  estate.  It  prevents  building 
and  the  expansion  of  manufacturing  industries. 

Moreover,  a  high  tax-rate  upon  loans  of  this  character  always 
increases  the  rate  of  interest  indirectly,  because  it  has  been  the  ex- 
perience of  most  States  that  where  the  lender  of  moneys  pays  the 
tax  he  proceeds  to  shift  that  off  upon  the  borrower.  He  does  this 
by  raising  the  rate  of  interest  by  an  amount  which  will  reimburse 
him  for  the  amount  of  the  tax  which  he  has  to  pay ;  and  he  does  this 
the  more  readily  because  the  amount  of  available  funds  is  reduced 
by  the  method  which  I  have  already  mentioned. 

In  connection  with  the  taxation  of  manufactures,  there  is  one 
point  upon  which  I  feel  that  I  will  have  to  differ  from  the  reader  of 

1  Mr.  Dunlop's  resolutions  were  referred  to  the  Committee  on  Resolutions  under  the  action  taken 
at  the  morning  session  of  the  conference. 


92  INDIANA   UNIVERSITY 

that  paper.  I  understand  that  he  takes  the  position  that  any  pro- 
ductive property  should  be  exempted  from  taxation,  or  should  have 
a  lower  rate  of  taxation,  or  a  lower  assessment.  If  you  exempt 
productive  property  from  taxation,  may  I  ask,  Where  arc  you  u<> 
ing  to  get  your  revenue?  The  non-productive  property  cannot  pay 
the  revenue  because  it  is  non-productive.  You  cannot  make  your 
household  goods  pay  a  revenue  because  your  household  goods  do 
not  produce  an  income.  It  is  only  the  property  which  is  used  in 
production,  property  the  use  of  which  gives  a  net  income,  which 
gives  the  owner  ability  to  pay  taxes. 

There  is  an  element  running  all  through  this  discussion  which 
it  seems  to  me  is  common  to  all  of  these  views,  and  that  is  this,  that 
the  chief  reason  why  men  object  to  the  payment  of  taxes  is  because 
there  is  a  sense  of  injustice,  there  is  a  feeling  that  the  burden  of 
taxation  is  not  equitably  distributed.  Although  a  man  may  recog- 
nize the  legitimacy  of  the  object  for  which  the  taxes  are  expended, 
though  he  may  recognize  economy  in  the  collection  and  in  the  ex- 
penditure and  in  the  administration  in  general  of  the  taxes,  he  re- 
fuses to  pay  his  tax  because  he  feels  that  the  burden  which  is  im- 
posed upon  him  is  out  of  proportion  to  the  income  which  he  enjoys 
from  his  property.  I  believe  that  the  reason  why  men  who  have 
intangible  property  seek  to  escape  taxation  is  because  they  know 
that  the  amount  of  taxes  which  they  pay,  when  considered  as  an 
income  tax  upon  the  property  which  produces  that  income,  is  so 
far  in  excess  of  what  is  reasonable  and  just  that  they  say  that  the 
law  is  wrong,  and  justify  themselves  in  hiding  their  property. 

Let  me  illustrate.  In  my  own  town  we  have  a  tax-rate  of  4.62 
dollars  in  the  section  in  which  I  live.  In  the  other  part  of  the  town 
—it  is  in  another  township — they  have  a  rate  of  4.82  dollars.  That 
rate  of  4.62  dollars  per  hundred  is  an  income  tax  of  fifty-seven  per 
cent  upon  an  eight  per  cent  loan.  It  is  an  income  tax  of  seventy- 
seven  per  cent  upon  a  six  per  cent  loan,  and  an  income  tax  of 
ninety-two  per  cent  upon  a  five  per  cent  loan.  Now  can  you  justify 
an  income  tax  of  that  kind?  Do  you  know  any  country  in  the 
world  which  would  presume  to  take  such  a  large  proportion  of  the 
income  of  its  citizens  in  the  form  of  an  income  tax  ?  And  that  rate 
applies  to  the  small  noteholder  as  well  as  the  large  noteholder.  I 
had  a  letter  the  other  day  which  I  think  is  interesting,  because  it 
throws  some  light  upon  this  question.  It  is  generally  supposed  that 
only  the  rich  man  suffers  from  a  tax  upon  intangibles.  This  is  a 
letter  written  by  a  woman  living  in  the  northern  part  of  the  State. 
.  She  says  she  understands  that  there  is  to  be  a  conference  here  for 


TAXATION   IN   INDIANA  93 

the  consideration  of  the  tax  system  in  Indiana,  and  that  she  has 
been  told  that  Mr.  Wolcott,  State  Tax  Commissioner,  is  in  favor  of 
exempting  money  or  personal  property  the  value  of  which  is  five 
hundred  dollars  or  less.  I  quote  from  her  letter: 

I  hope  it  can  be  done.  In  my  own  case  my  sister  and  1  have  our  own 
home  together  so  you  see  there  is  no  income  from  this,  as  we  live  in  it. 
Then  we  have  four  hundred  and  twenty-five  dollars  that  draws  interest. 
My  brother-in-law  pays  seven  per  cent,  which  makes  twenty-nine  dollars 
and  seventy-five  cents.  You  see  what  a  small  sum  is  left  after  I  pay  ten 
dollars  tax.  It  does  not  seem  fair  to  me  at  all,  for  it  is  so  little.  No  one 
but  my  brother-in-law  would  pay  seven  per  cent.  Some  say  do  not  give  it 
in  for  taxation,  but  that  would  not  be  right. 

Now  is  not  that  pathetic  ?  Here  is  a  woman  getting  about  thirty 
dollars  from  a  little  loan  that  she  has,  and  she  says  it  would  not  be 
right  to  withhold  that,  and  she  turns  it  in,  and  the  State  taxes  her 
thirty  per  cent,  or  over,  upon  her  small  income.  Truly,  the  taxa- 
tion of  intangibles  falls  only  upon  the  honest  or  the  ignorant. 

When  this  tax  was  first  introduced  into  Indiana,  when  the  policy 
of  taxing  intangible  property  was  first  adopted,  we  had  a  very  low 
tax-rate.  Prior  to  1835  in  this  State  there  was  no  tax  upon  in- 
tangible property.  In  that  year  we  adopted  a  partial  or  incomplete 
general  property  tax,  or  ad  valorem  tax.  At  that  time  the  rate  of 
taxation  upon  general  property  for  State  purposes  was  five  cents 
on  the  hundred  dollars,  and  a  poll  tax  of  fifty  cents.  The  next 
year  it  was  increased  to  fifteen  cents  on  the  hundred  dollars,  and 
then  it  increased  during  the  period  of  internal  improvements.  In 
1851  when  our  present  constitution  was  adopted  the  rate  for  gen- 
eral State  purposes  was  thirty  and  one-half  cents  on  the  hundred 
dollars,  and  seventy-five  cents  on  each  poll.  In  1852  and  1853  that 
rate  was  reduced  to  twenty  cents,  with  a  fifty  cent  poll  tax,  and  in 
1854  it  was  reduced  to  fifteen  cents.  In  1851  the  rate  for  local  pur- 
poses in  the  State  was  about  forty  per  cent  higher  than  that  for 
State  purposes.  Taking  the  two  together  we  have  this  result :  in 
1851  the  total  tax  on  all  property,  tangible  and  intangible,  for  local 
and  for  State  purposes,  was  about  seventy-three  cents  on  the  one 
hundred  dollars;  in  1852  and  1853,  less  than  sixty-five  cents  on  the 
hundred  dollars,  and  in  1854,  less  than  sixty  cents  on  the  hundred 
dollars.  Thus  you  see  that  the  rate  at  that  time  did  not  make  this 
kind  of  a  tax  unjust.  It  did  not  impose  a  tax  upon  the  return  from 
intangible  property  which  was  so  heavy  that  it  could  not  be  borne, 
for  interest  rates  ranged  from  six  to  ten  per  cent. 

I  mention  this  because  I  want  you  to  remember  that  when  the 
present  provision  of  our  constitution  requiring  that  the  rates  upon 


94  INDIANA   UNIVEESITY 

all  property  must  be  uniform  was  adopted  the  total  amount  of  our 
tax  was  very  small  and  interest  rates  were  high.  I  know  it  is  true 
that  we  have  a  tendency  to  think  that  whatever  is  is  right,  and  that 
there  is  an  inertia  in  us  which  allows  things  to  go  on  a-s  they  are. 
But  let  me  ask  you  this  question :  Do  you  believe  that  if  conditions 
in  1851  had  been  such  as  they  are  today,  those  level-headed,  prac- 
tical business  men  who  sat  in  the  constitutional  convention  of  1851 
would  have  adopted  a  system  that  imposed  a  tax-rate  upon  intangi- 
ble personal  property  which  was  practically  confiscatory,  or  that 
would  take  from  fifty  to  ninety-five  per  cent  of  the  income  derived 
from  it?  If  the  situation  had  been  then  what  it  is  now  we  would 
not  have  our  rigid  uniform  system. 

I  will  not  detain  you  longer,  but  the  point  I  want  to  bring  out 
here  is  this,  that  the  tax  upon  intangible  property,  as  upon  any 
other  kind  of  property,  must  bear  a  fair  relation  to  the  ability  of 
the  owner  to  pay  the  tax  out  of  the  income  derived  from  the  prop- 
erty. When  the  income  from  notes  and  mortgages  is  an  average  of 
five  per  cent,  the  maximum  tax  which  you  can  put  upon  notes  and 
mortgages,  and  which  the  owners  of  that  kind  of  property  will  pay, 
if  fifty  cents  on  the  one  hundred  dollars.  That  would  be  equal  to 
a  ten  per  cent  income  tax,  which  is  a  high  rate.  We  can  get  more 
revenue  out  of  this  intangible  property  by  fixing  a  rate  of  that  kind, 
which  the  people  will  recognize  as  being  more  nearly  just,  than  we 
can  with  the  present  unjust  method.  That  has  been  the  experience 
of  other  States  which  have  adopted  this  property  tax,  such  as  I 
suggest  here. 

I  am  not  in  favor  of  such  a  tax  as  they  have  in  New  York,  by 
which  a  man  can  pay  a  small  amount  and  forever  escape  taxation 
upon  that  property.  They  will  find  in  New  York  as  the  result  of 
that  tax,  of  that  system  of  taxation,  that  it  is  going  to  dry  up  one 
of  the  sources  of  their  revenue.  It  does  not  take  into  account  the 
time  for  which  these  loans  are  to  run.  I  think  it  would  be  fairer 
to  have  an  annual  tax,  say,  of  fifty  cents  on  the  hundred  dollars 
upon  intangible  property,  and  let  that  be  paid  as  long  as  the  debt 
is  in  existence — not  once,  and  then  have  the  debt  run  on  indefinite- 
ly, but  as  long  as  that  debt  is  in  existence. 

Now  I  have  exceeded  the  time  which  has  been  granted  me.  The 
only  thing  I  wish  to  emphasize  again  is  this,  that  in  order  to  have 
people  feel  that  a  system  of  taxation  is  just  it  must  be  constructed 
upon  this  fundamental  basis,  namely,  that  the  rate  shall  bear  some 
proper  relation  to  the  income  which  is  derived  from  property  or 
from  services. 


IV.    WHAT  OTHER  STATES  ARE  DOING 


SOME  PHASES  OF  TAXATION  IN  MINNESOTA 
JAMES  W.  PUTNAM,  Professor  of  Political  Economy,  Butler  College 

For  the  funds  with  which  to  meet  the  ever-growing  demands 
upon  its  treasury,  the  State  of  Minnesota  is  depending  less  and  less 
on  the  general  property  tax.  After  a  trial  of  more  than  half  a  cen- 
tury this  method  of  raising  State  revenues  has  proved  its  in- 
adequacy in  this  State,  as  in  others.  The  statutes  provide  that  ' '  all 
real  and  personal  property  in  this  State,  and  all  personal  property 
of  persons  residing  therein,  including  the  property  of  corporations, 
banks,  banking  companies  and  bankers,  is  taxable  except  such  as  is 
by  law  exempt  from  taxation."  Exemptions  are  made  of  public 
schools  and  libraries  and  other  public  property  used  exclusively  for 
public  purposes ;  of  colleges  and  other  institutions  of  higher  learn- 
ing, and  of  churches,  hospitals,  and  institutions  of  purely  public 
charity.  Bonds  and  certificates  of  indebtedness  issued  by  the  State 
6f  Minnesota  or  by  any  of  its  minor  political  divisions  are  also 
exempt  from  all  taxation,  except  the  inheritance  tax.  Finally,  an 
exemption  of  personal  property  to  the  value  of  $100  is  made  for 
eveiy  head  of  a  family  subject  to  assessment.  Aside  from  these 
exemptions,  all  kinds  of  property  are  subject  to  some  kind  of  taxa- 
tion. But  no  attempt  is  made  to  tax  all  kinds  of  property  by  the 
same  methods  nor  on  the  same  basis.  Substantial  justice  and  work- 
ability are  the  guiding  principles  in  the  endeavor  to  give  the  State 
a  more  satisfactory  system  of  taxation.  Nor  is  it  assumed  that 
justice  and  equality  are  synonymous  terms  when  applied  to  differ- 
ent kinds  of  property.  Although  a  considerable  amount  of  prop- 
erty has  been  removed  from  the  lists  of  the  general  property  tax 
and  subjected  to  special  taxation,  the  part  that  still  remains  is  not 
treated  as  homogeneous.  For  the  purposes  of  assessment  and  taxa- 
tion, it  is  divided  into  four  classes.  Iron  ore,  whether  mined  or  un- 
mined,  constitutes  the  first  class  and  is  assessed  at  fifty  per  cent  of 
its  true  and  full  value.  The  second  class  consists  of  household 
goods  and  furniture,  wearing  apparel,  musical  instruments,  and 
other  furnishings  and  equipment  of  the  family  residence.  Twenty- 
five  per  cent  of  the  true  value  is  made  the  basis  of  assessment  in  this 

(95) 


96  INDIANA   UNIVERSITY 

class.  The  third  class  includes  all  live  stock,  agricultural  imple- 
ments and  products,  and  manufacturers'  materials,  machines,  and 
products,  and  all  unplatted  real  estate,  aside  from  the  ore-bearing 
lands.  Evidently  this  class  is  intended  to  include  the  usual  agents 
of  production  in  the  agricultural  and  -manufacturing  communities 
and  deals  with  tangible  personal  and  corporate  possessions.  It 
bears  an  assessment  of  thirty-three  and  one-third  per  cent.  The 
fourth  class  consists  of  all  property  not  included  in  one  of  the  three 
preceeding  classes  and  not  subject  to  a  gross  earnings  tax  or  special 
form  of  taxation.  Property  falling  in  the  fourth  class  is  assessed 
at  forty  per  cent  of  its  full  value. 

In  its  modified  form  the  general  property  tax  is  retained  as  a 
source  of  revenue  for  both  the  State  and  local  governments.  But 
the  development  of  other  sources  of  income  is  reducing  its  fiscal 
importance  to  the  State.  Of  the  $17,809,401.36  received  by  the 
.State  treasury  during  the  fiscal  year  ending  July  31,  1913,  receipts 
other  than  those  from  taxes  amounted  to  $7,585,200.17 ;  of  the  $10,- 
224,201.19  received  from  all  kinds  of  taxes,  the  general  property 
tax  yielded  only  $4,640,837.14,  or  forty-five  and  four-tenths  while 
the  special  taxes,  licenses,  and  fees  aggregated  $5,583,364.05  or 
fifty-four  and  six-tenths  per  cent.  If  to  this  latter  sum  be  added 
the  commercial  revenues  and  the  non-revenue  receipts,  the  general 
property  tax  will  be  found  to  yield  twenty-six  and  six-hundredths 
per  cent  of  the  entire  State  treasury  receipts  for  the  year. 

The  present  trend  in  Minnesota  is  toward  making  much  of  the 
special  taxes.  These  are  of  two  kinds,  special  taxes  on  corporations 
and  special  taxes  on  property.  Of  all  the  special  taxes  on  corpora- 
tions, that  on. railroads  is  the  oldest  as  well  as  the  most  productive. 
Since  1857,  Minnesota  has  taxed  railroads  on  their  gross  earnings. 
In  1903  the  rate  was  raised  from  three  per  cent  to  four  per  cent  of 
the  gross  earnings  from  operation,  and  in  1913  it  was  advanced  to 
five  per  cent.  This  tax  is  in  lieu  of  all  other  taxes  upon  either  the 
property  or  franchises  of  the  railroads.  The  gross  earnings  tax  in 
1913  brought  into  the  State  treasury  from  the  coffers  of  the  rail- 
roads $4,352,508.42,  a  sum  almost  equal  to  that  paid  by  both  real 
estate  and  personal  property  combined.  The  industrial  develop- 
ment of  the  State  will  inevitably  increase  the  returns  from  this  tax. 
Other  corporations  subject  to  a  gross  earnings  tax  are  express, 
freight-line,  sleeping-car,  and  telephone  companies.  The  express 
companies  pay  eight  per  cent  of  their  gross  earnings  after  deducting 
the  amounts  paid  to  the  railroads  for  transportation.  The  freight 
lines  and  the  private-car  companies  are  required  to  pay  six  per  cent 


TAXATION   IN   INDIANA  97 

of  their  gross  earnings  into  the  State  treasury;  while  companies 
operating  sleeping-cars,  dining-cars,  tourist,  drawing-room,  and 
parlor  cars  contribute  five  per  cent  annually,  and  the  telephone  com- 
panies escape  with  a  tax  of  three  per  cent.  Strangely  enough  the 
telegraph  companies  are  still  assessed  by  the  old  method  of  placing . 
a  cash  valuation  on  their  property  and  fixing  a  percentage  tax  on 
this  valuation.  The  tax,  however,  is  levied  by  the  commission  for 
the  benefit  of  the  State  and  is  paid  into  the  State  treasury. 

Very  similar  to  the  gross  earnings  tax  is  the  gross  premiums  tax 
on  the  insurance  companies.  Both  domestic  and  foreign  companies, 
except  town  and  farmers'  mutual  insurance  companies,  are  required 
to  pay  annually  a  sum  equal  to  two  per  cent  of  the  "gross"  pre- 
miums received  in  the  State,  less  return  premiums.  Domestic  com- 
panies are  relieved  of  all  other  taxes  except  upon  their  real  estate 
which  is  assessed  in  the  same  manner  as  that  of  individuals.  The 
foreign  companies  are  subject  to  the  same  taxes  as  the  domestic  com- 
panies, and,  in  addition  to  these,  *a  personal  property  tax  on  all  of 
their  personal  property  situated  in  the  State.  Since  1913  each 
foreign  fire  insurance  company  must  also  pay  for  the  support  of  the 
State  Fire  Marshal's  office  a  sum  equal  to  three-eighths  of  one  per 
cent  of  its  premiums.  The  contributions  of  the  insurance  com- 
panies towards  the  support  of  the  State  government  for  1913 
amounted  to  $443,234.69. 

The  special  taxes  the  returns  from  which  are  divided  between 
the  State  and  local  governments  are  the  inheritance  tax,  the  mort- 
gage registry  tax,  and  the  vessel  tonnage  tax.  Of  these  special 
taxes,  the  inheritance  tax  is  by  far  the  most  productive  as  well  as 
socially  most  significant.  It  is  progressive  for  both  direct  and  col- 
lateral inheritances,  and  varies  in  rate  from  one  per  cent  to  fifteen 
per  cent,  depending  upon  the  amount  of  .the  inheritance  and  the 
nearness  or  remoteness  of  the  relationship  of  the  recipient  to  the 
decedent.  The  nearer  the  relationship  and  the  smaller  the  sum  in- 
herited the  lower  the  rate  of  taxation,  and  vice  versa.  Direct  de- 
scendants pay  from  one  per  cent  to  four  and  one-half  per  cent; 
while  the  rate  on  collateral  inheritances  varies  from  three  per  cent 
to  fifteen  per  cent.  The  amount  exempt  from  the  inheritance  tax 
also  is  determined  by  the  nearness  or  remoteness  of  that  relation- 
ship. This  tax  yielded  to  the  State  $437,261.55  in  1913.  Formerly 
this  tax  went  entirely  to  the  State  treasury.  Since  1911,  the  county 
in  which  the  decedent  resided  receives  ten  per  cent  of  the  tax. 

In  the  taxation  of  mortgages  Minnesota  has  also  broken  away 
from  the  traditional  method.  Before  1907  mortgages  were  assessed 

7-29Q2 


98  INDIANA    UNIVERSITY 

and  taxed  as  other  forms  of  personal  property.  The  inevitable  re- 
sult was  wholesale  evasion  of  the  tax  by  sending  the  mortgages  out 
of  the  taxing  jurisdiction  or  by  having  them  recorded  under  the 
name  of  nonresidents.  To  remedy  this  evil  the  legislature  in  1907 
exempts  mortgages  from  all  taxation  except  a  registry  fee  of  fifty 
cents  on  each  $100  of  the  principal  debt  or  obligation  secured  by 
the  mortgage.  By  the  act  of  April  2,  1913,  the  tax  was  still  further 
reduced  to  fifteen  cents  on  each  one  hundred  dollars,  except  when 
the  mortgage  secures  a  debt  whose  date  of  maturity  is  more  than 
five  years  in  the  future,  in  which  case  the  rate  is  twenty-five  cents 
on  the  $100.  Formerly  the  entire  tax  was  segregated  to  the  State. 
Since  1913  it  is  divided  between  the  State  and  the  local  govern- 
ments. The  total  mortgage  registry  tax  collected  by  the  counties 
and  State  in  1912  was  $527,345.75. 

The  vessel  tonnage  tax  is  of  interest  only  as  still  further  showing 
the  general  trend  away  from  the  old  idea  of  the  general  property 
tax.  It  amounts  to  only  about  $40,000  a  year,  one-half  of  which  is 
certified  by  the  State  treasurer  back  to  the  counties  in  which  are 
located  the  place  of  registry  or  hailing-port  of  the  vessels  paying 
the  tax.  The  tax  is  three  cents  a  ton  on  the  net  tonnage  of  the 
vessel  and  is  the  only  tax  to  which  the  vessel  is  subject. 

A  long  list  of  licenses  and  fees  also  brings  its  tribute  to  the 
treasury  of  the  State.  Among  these  are  motor  car  licenses,  liquor 
licenses,  hunting  and  fishing  licenses,  grain  and  oil  inspection  fees, 
incorporation  fees,  and  many  others.  Commercial  revenues  also 
figure  largely  in  the  treasury  receipts.  In  1913  the  mineral  con- 
tracts and  royalties  amounted  to  $554,702.26,  and  the  sale  of  timber 
on  State  lands  to  $285,857.28,  while  the  sale  of  twine  at  the  State 
prisons  yielded  $1,634,469.12. 

Special  taxes  play  a  smaller  part  in  the  local  revenues  than  in 
those  of  the  State.  Only  three  will  be  noted.  These  are  the  tax 
on  money  and  credits,  the  corporation  taxes,  and  the  grain  tax. 
The  experience  of  Minnesota  has  apparently  been  about  the  usual 
one  with  regard  to  the  assessment  of  money  and  credits.  In  1911, 
therefore,  it  frankly  abandoned  the  attempt  to  include  these  items 
along  with  other  personal  property  and  provided  that  all  moneys 
and  credits  should  be  listed  separately  by  the  local  assessor,  and  that 
they  should  be  taxed  at  the  rate  of  three  mills  on  each  dollar  of  fair 
^  cash  value.  The  first  year  this  system  was  in  operation  41,439  per- 
'sons  listed  $115,481,807.00  and  the  following  year  50,664  listed 
$135,369,314.  Prior  to  the  passage  of  the  new  law,  the  total  amount 
of  the  money  and  credits  listed  had  never  exceeded  twenty-nine  per 


TAXATION    IN    INDIANA  99 

cent  of  the  total  personal  property  assessment  of  the  State.  In 
1911  it  jumped  to  forty-eight  and  one-half  per  cent,  and  in  the  fol- 
lowing year  it  reached  fifty  and  eight-tenths  per  cent.  Unlike  the 
old  law,  the  new  one  is  not  confiscatory  and  is,  therefore,  expected 
to  grow  in  public  favor. 

Corporations  and  joint  stock  companies,  except  those  taxed  un- 
der special  laws  on  their  gross  earnings,  are  assessed  locally  on  their 
tangible  property,  real  and  personal,  and  upon  their  capital  stock 
at  its  actual  or  market  value  in  excess  of  the  value  of  the  tangible 
property.  This  "corporate  excess"  or  capital  stock  assessment  is 
listed  as  "stocks  and  bonds7'  and  is  intended  to  cover  the  franchise. 
This  method  of  assessment  applies  not  only  to  manufacturing  and 
mercantile  corporations  but  to  local  public  service  corporations  as 
well.  The  Tax  Commission  has  recommended  the  application  of  the 
gross  earnings  tax  to  street  railways  and  other  public  utility  cor- 
porations, but  thus  far  they  remain  on  the  lists  of  the  local  assessors. 

The  so  called  "bushel  tax"  is  a  special  business  tax  assessed 
locally.  It  taxes  all  owners  of  grain  passing  through  an  elevator 
or  warehouse,  not  in  proportion  to  the  value  or  price,  but  at  a  flat 
rate  per  bushel,  varying  with  the  kind  of  grain.  On  wheat  and  flax 
the  rate  is  one-fourth  of  one  mill  per  bushel,  and  on  all  other  grain, 
one-eighth  of  one  mill.  The  tax  has  proved  so  unsatisfactory  that 
the  Tax  Commission  recommended  that  the  rate  be  quadrupled  or 
that 'the  tax  be  abolished  altogether.  The  last  session  of  the  legis- 
lature, however,  refused  to  do  either.  The  entire  yield  of  this  tax 
is  only  about  $35,000. 

Minnesota  is  just  now  interested  in  the  problem  of  improving  its 
assessments.  At  present  the  assessments  are  made  by  about  2,300 
local  assessors  locally  elected  and  with  practically  no  supervision. 
To  be  sure  the  assessments  are  reviewed  by  a  town  board  of  review 
of  which  the  assessor  is  a  member  and  which,  presumably,  equalizes 
assessments  between  individuals ;  then  by  a  county  board  of  review 
which  attempts  to  harmonize  the  assessments  in  the  different  towns 
in  the  county;  and  finally,  by  the  State  Tax  Commission  which  at- 
tempts to  harmonize  and  equalize  the  assessments  in  the  various 
counties.  But  the  Commission  can  not  control  the  original  assess- 
ments in  such  a  way  as  to  insure  a  reasonable  degree  of  harmony 
and  fairness  throughout  the  State.  However,  since  eighty-eight  and 
one-half  per  cent  of  all  the  taxes  paid  by  the  taxpayers  of  the  State 
are  expended  for  purely  local  purposes  in  the  counties,  cities,  vil- 
lages, towns,  and  school  districts,  the  most  urgent  demand  is  for 
unification  and  improvement  of  assessments  within  the  counties. 


100  INDIANA    UNIVERSITY 

The  Tax  Commissioners  are  urgently  recommending  the  abolition  of 
the  local  assessors  and  the  appointment  by  the  county  board  of  a 
county  assessor  in  each  county  with  power  to  appoint  his  own  depu- 
ties, and  with  sufficient  compensation  to  command  the  entire  time 
and  energy  of  a  man  of  training  and  ability.  Under  the  existing 
law  it  would  be  possible  to  obtain  a  degree  of  supervision  over  the 
local  assessments  for  the  statutes  provide  that  "when  deemed  best" 
the  county  board  may  appoint  a  county  supervisor  of  assessments. 
Apparently  the  provision  has  not  proved  effective.  In  1911  the 
average  rate  of  assessment  throughout  the  State  was  thirty-two  and 
forty-nine  hundredths  per  cent  of  the  estimated  true  value  of  the 
property  assessed.  The  average  rate  for  the  counties  varied  from 
twenty -two  and  fifty-two  hundredths  per  cent  in  Morrison  county 
to  forty-three  and  sixty-hundredths  per  cent  in  Crow  Wing  county. 
As  these  assessments  were  made  while  the  law  required  that  all 
property  be  assessed  at  its  full  and  true  value,  the  statistics  only 
show  that  local  assessors  in  Minnesota  are  subject  to  the  same  limi- 
tations as  those  of  other  States. 

From  the  foregoing  brief  survey  it  is  apparent  that  the  present 
trend  in  Minnesota  is  toward  narrowing  and  modifying  the  general 
property  tax,  toward  extending  the  special  taxes,  and  toward  cen- 
tralizing the  machinery  of  tax  administration.  Toward  the  reali- 
zation of  at  least  two  of  these  aims  the  State  is  making  real 
progress. 

WHAT  WISCONSIN  IS  DOING 
ALFRED  F.  POTTS,  Attorney,  Indianapolis 

It  took  seven  hills  for  Rome  to  sit  on  when  she  ruled  the  world. 
Under  modern  methods,  Madison  does  it  on  two.  On  one  is  Wis- 
consin's statehouse,  incomparably  beautiful  with  its  granite-roofed 
dome,  while  a  mile  away,  at  the  end  of  the  avenue,  on  another 
hill,  covered  by  a  splendid  forest  reaching  to  the  shores  of  the  lake, 
are  the  many  buildings  of  the  university. 

As  it  should  be,  Wisconsin  is  governed  not  only  by  the  politi- 
cians and  statesmen  gathered  in  her  Capitol,  but  almost  equally, 
if  indirectly,  by  the  highly  trained  educators  at  the  university.  If 
higher  education  at  the  public  expense  is  justifiable,  we  must 
assume  that  its  object  is  to  prepare  men  to  solve  the  most  difficult 
problems  in  our  complex  life.  One  feels  that  Wisconsin  has  the 
right  way  when  he  meets  Governor  McGovern,  a  keen,  practical 
politician  and  highly  educated  gentleman,  walking  between  the 


TAXATION   IN   INDIANA  1.01 

Capitol  and  the  university  arm  in  arm  with  Dr.  Ely  or  Professor 
Adams,  deep  students 'of  political  science. 

It  was  to  enter  in  a  measure  into  this  life  and  to  study  public 
utility  practice  at  its  source  that  I  spent  last  winter  at  the  univer- 
sity. I  presume  it  was  supposed  by  your  program  makers  that 
in  addition  to  absorbing  all  other  human  knowledge  that  I  had 
mastered  Wisconsin 's  new  tax  system.  As  I  took  occasion  to  re- 
mark in  the  course  of  a  talk  at  Madison,  I  learned  by  going  to 
Wisconsin  University  that  it  was  all  a  mistake  to  take  your  edu- 
cation when  you  are  young  for  most  of  it  had  to  be  done  over 
again.  True,  a  few  fundamental  things  remained  the  same.  Two 
and  two  still  make  four,  and  in  a  coeducational  school  two  are 
company  and  three's  none,  but  in  the  larger  aspects  of  life,  in 
matters  of  social  and  political  science  and  the  interpretation  of 
history,  all  was  changed.  I  made  up  my  mind  that  what  one 
should  do  was  to  take  his  education  just  as  late  in  life  as  possible, 
so  as  to  bring  it  down  to  date.  Then -when  one  went  over  to  the 
other  side,  if  he  made  Heaven,  he  would  have  the  very  latest 
results  of  philosophical,  psychological,  laboratory  and  other  re- 
search work  to  impart  to  any  old  philosopher  who  happened  to 
stroll  by.  Or  if  he  chanced  to  go  below,  he  would  know  the  latest 
methods  of  refrigeration  and  the  use  of  asbestos  in  resisting  heat. 

One  thing  Wisconsin  with  all  its  wonderful  educational  system 
failed  to  accomplish,  and  that  was  to  get  people  to  stop  lying  about 
their  personal  property  when  the  tax  assessor  came.  They  would 
tell  the  truth  under  any  other  temptation  to  prevaricate,  would 
sacrifice  business,  social  position,  or  political  preferment  on  the 
altar  of  personal  integrity,  but  when  it  came  to  naming  the  num- 
ber of  dollars  they  had  in  bank  or  lent  out,  they  would  lie  about 
it  just  as  brazenly  as  anybody  in  Indiana. 

And  this  evasion  went  on  until  the  owners  of  real  estate,  the 
builders,  the  men  who  improve  and  make  the  city  and  draw  the 
population  and  create  all  the  trade  and  the  demand  for  money, 
were  paying  all  the  taxes  and  carrying  all  the  burden  of  govern- 
ment just  as  they  do  in  Indiana.  A  lot  of  these  disagreeable, 
meddlesome,  so-called  thinkers  on  University  Hill,  who  had  saved 
up  money  enough  to  buy  a  home  and  a  rental  property,  found 
that  it  was  taking  a  large  part  of  the  rental  income  to  pay  the 
taxes  while  the  man  who  lent  his  money  and  did  nothing  to  improve 
the  city  got  off  free  through  the  simple  process  of  lying  to  an 
entirely  complacent  assessor,  who  lived  next  door  and  borrowed 
a  little  wood  or  coal  when  he  ran  short. 


102  INDIANA    UNIVERSITY 

Now  there  was  nothing  new  in  the  discovery  of  the  rank  injus- 
tice in  this  situation.  Every  community  suffers  the  same  injustice. 
The  men  who  escape  are  usually  so-called  financiers.  They  have 
the  ready  money  whenever  there  is  a  big  bargain  on  the  counter. 
They  pick  rapidly  because  somebody  else  carries  the  basket.  If 
anybody  protests,  he  is  silenced  by  the  unanswerable  argument 
that  it  is  absurd  to  expect  capital  which  can  earn  but  5  or  6  per 
cent  to  pay  3  or  4  per  cent  or  more  than  half  the  income  to  the 
tax  collector. 

So  the  practical  statesman  from  the  Capitol  and  the  professor 
from  the  hill  met  together  arid  resolved  that  the  personal  property 
tax  was  a  farce ;  that  it  not  only  produced  no  revenue  worth  con- 
sidering, but  was  a  demoralizing  agency  in  that  it  compelled  and 
justified  universal  lying  at  which  all  men  winked.  They  thought 
it  out  scientifically  and  reached  the  conclusion,  as  stated  by  Pro- 
fessor T.  S.  Adams,  that  the  old  system  was  wrong  in  that  it  was 
a  tax  on  things  rather  than  on  persons;  that  it  did  not  reach  the 
people  whose  wealth  was  situated  in  other  jurisdictions  than  the 
one  in  which  they  might  happen  to  reside.  These  people  as  well 
as  others  who  were  paid  for  their  talent  and  service  "owe  a  fiscal 
allegiance  to  the  jurisdiction  in  which  their  persons  are  protected 
and  their  children  educated." 

So  came  into  existence  in  1911  the  Wisconsin  income  tax.  The 
rates  are  progressive  with  the  amount  .of  the  income.  In  the 
case  of  individuals  and  partnerships  the  rate  is  from  one  per  cent 
on  the  $1,000  of  taxable  income  to  six  per  cent  on  taxable  incomes 
over  $12,000.  Corporation  income  is  taxed  from  a  minimum  of 
2  per  cent  on  the  first  $1,000  to  6  per  cent  on  incomes  over  $6,000, 
This  tax  is  in  effect  on  net  income  only  as  there  are  exemptions  in 
behalf  of  individuals  as  follows :  To  an  unmarried  man  an  exemp- 
tion of  $800.  To  husband  and  wife,  $1,200.  For  each  child  under 
18,  $200.  For  each  dependent  individual,  $200.  In  arriving  at 
the  net  income,  the  following  deductions  are  allowed:  (1)  Ordi- 
nary expenses  of  the  business  or  profession.  (2)  Losses  not  com- 
pensated by  insurance  or  otherwise.  (3)  Dividends  or  interest 
received  from  corporations  whose  income  has  been  assessed.  (4) 
Interest  paid  on  indebtedness  and  reported.  (5)  Interest  from 
exempt  bonds.  (6)  Salaries  of  United  States  officials.  (7)  Pen- 
sions. (8)  Taxes  upon  property  which  produced  the  income  taxed. 
(9)  Inheritance.  (10)  Life  insurance. 

In  dealing  with  the  income  of  corporations  deductions  to  reach 
the  net  income  are  allowed  as  follows: 


TAXATION    IN    INDIANA  103 

1.  Wages  and  salaries  of  officers  and  employees. 

2.  Ordinary  and  necessary  expenses  paid  within  the  year  out 
of  income  in  the  maintenance  and  operation  of  its  business  and 
property,  including  a  reasonable  allowance  for  the  depreciation  of 
the  property  from  which  the  income  is  derived.     Payments  made 
for  additions  or  improvements  are  not  "ordinary  and  necessary 
expenses"  and  are  not  deductible  from  income. 

3.  Losses  actually  sustained  within  the  year  and  not  compen- 
sated for  by  insurance  or  otherwise.     The  amount  of  the  loss  and 
the  manner  in  which  it  occurred  are  required  to  be  set  forth  fully 
in  the  return  made  by  the  corporation. 

4.  Taxes  paid  upon  property  from  which  the  income  is  derived. 

5.  Dividends  or  income  from  stock  upon  which  the  income  tax 
has  been  paid. 

6.  Interest  from  bonds  or  other  securities  exempted  from  taxa- 
tion under  the  laws  of  the  United  States. 

Exemptions  (Sec.  10S7M-5).  Income  of  any  mutual  savings,  or  loan 
and  building  association,  or  any  religious,  scientific,  educational,  benevolent, 
or  other  association  of  individuals  not  for  profit  is  exempted. 

Income  derived  from  property  and  privileges  by  persons  now  required 
by  law  to  pay  taxes  or  license  fees  directly  into  the  treasury  of  the  State  in 
lieu  of  other  taxes,  such  persons  continuing  to  pay  taxes  and  license  fees  as 
heretofore,  is  exempted.  This  exemption  appears  to  include  income  from 
railroad,  palace  and  sleeping-car,  freight  line  and  equipment,  express, 
street  railway,  including  connected  electric  light,  heat,  and  power  com- 
panies, telegraph,  boom  and  improvement,  plank  road,  fire  insurance,  life 
insurance,  accident,  surety,  etc.,  telephone  and  title  guaranty  companies. 
This  section  does  not  exempt  water,  light,  heat,  power,  and  other  public 
utilities  taxable  locally.  Inasmuch  as  the  income  tax  law  permits  the 
income  tax  to  be  offset  by  the  personal  property  tax,  and  as  all  the  prop- 
erty of  such  public  utilities,  including  land,  is  defined  as  personal  property 
under  the  Wisconsin  law,  the  income  of  public  utilities  not  specifically 
exempted  from  the  income  tax  appears  to  escape  taxation  under  the  income 
tax  in  almost  all  instances. 

That  the  Wisconsin  income  tax  is  practically  a  substitute  for 
the  personal  property  tax  has  been  judicially  decreed  by  a  deci- 
sion of  Chief  Justice  Winslow  in  "The  Income  Tax  Cases,"  148 
Wis.  456,  which  reads  as  follows : 

By  the  present  law  it  is  quite  clear  that  personal  property  taxation  for 
all  practical  purposes  becomes  a  thing  of  the  past.  The  specific  exemptions 
of  all  money  and  credits  and  the  great  bulk  of  stocks  and  bonds,  as  well  as 
of  all  farm  machinery,  tools,  wearing  apparel,  and  household  furniture  in 
actual  use,  regardless  of  value,  go  far  to  eliminate  taxation  of  personal 
property;  while  the  provision  that  he  who  pays  personal  property  taxes 
may  have  the  amount  so  paid  credited  on  his  income  tax  for  the  year  seems 


104  INDIANA   UNIVERSITY 

to  put  an  end  to  any  effective  taxation  of  personal  property.  That  taxation 
of  such  property  has  proven  a  practical  failure  will  be  admitted  by  all  who 
have  given  any  attention  to  the  subject.  Doubtless  this  was  one  of  the 
main  arguments  in  the  legislative  mind  for  the  passage  of  the  present  act. 
By  this  act  the  legislature  has,  in  substance,  declared  that  the  State's 
system  of  taxation  shall  be  changed  from  a  system  of  uniform  taxation  of 
property  (which  so  far  as  personal  property  is  concerned  had  proven  a 
failure)  to  a  system  which  shall  be  a  combination  of  two  ideas,  namely: 
taxation  of  persons  progressively,  according  to  ability  to  pay,  and  taxation 
of  real  property  uniformly,  according  to  value. 

With  this  brief  summary  of  this  law  your  inquiry  directs  itself 
to  the  results.  I  might  with  some  labor  and  much  misgiving  go 
over  the  historical  matter  before  me  and  after  the  manner  of  some 
profound  writers  of  the  original  research  school  change  the  phrase- 
ology of  some  of  the  reports  and  so  produce  apparently  original 
matter  on  this  subject.  I  refrain  from  this  in  the  interest  of  exact- 
ness and  authority  of  statement  by  quoting  from  the  address  of 
Governor  McGovern  of  Wisconsin  before  a  Conference  of  Govern- 
ors held  at  Richmond,  Ya.,  in  December,  1912.  Governor  McGov- 
ern said  in  part : 

The  reason  an  income  tax  was  demanded  by  the  people  of  Wisconsin 
was  that  the  old  system  of  personal  property  taxation  had  broken  down. 
As  to  this  there  is  no  disagreement.  Not  in  Wisconsin  alone,  but  every- 
where, the  old  method  of  trying  to  raise  revenue  by  taxation  of  intangible 
personal  property  has  completely  failed.  Instead  of  adequate  revenue  justly 
obtained  the  result  almost  uniformly  has  been  inequality,  discrimination, 
evasion,  and,  so  far  as  this  source  goes,  increasing  deficiency. 

Then  after  a  summary  of  the  law  which  we  have  before  us 
Governor  McGovern  continued: 

So  much  for  the  main  provisions  of  the  law.  How  has  it  worked? 
This,  of  course,  is  the  vital  point.  The  conventional  thing  to  say  about 
income  taxation  is  that  it  is  admirable  in  theory  but  that  it  has  utterly 
failed  in  practice.  By  failure  is  meant  that  income  taxation  has  not 
proved  a  success  as  a  revenue  producer;  and  so  interpreted  the  criticism 
was  sound  so  far  as  American  experience  went.  Fortunately  it  is  so  no 
longer.  Income  taxation  in  Wisconsin  is  an  unqualified  success.  It  pro- 
duces abundant  revenues. 

At  one  time  or  another  twenty  American  States  have  tried  income  taxa- 
tion, and  all  have  failed.  The  new  law  recently  passed  in  Oklahoma  pro- 
duced less  than  $2,500.  Some  States  raised  from  $7,000  to  $15,000  a  year 
from  this  source,  others  raised  a  trifle  more,  and  some  much  less.  In  1890 
Louisiana  raised  only  $104  by  income  taxation  out  of  a  total  State  tax  of 
over  $2,000,000.  The  nearest  approach  to  success  has  been  made  here  in 
Virginia,  where  as  high  as  $129,000  was  recently  raised  in  a  single  year, 
£he  largest  sum  heretofore  produced  in  this  way  in  any  State  in  America  in 


TAXATION   IN   INDIANA  105 

time  of  peace.  The  average  yield  from  income  taxation  in  the  Old  Domin- 
ion is,  I  believe,  about  $100,000  per  year. 

What,  now,  is  the  fact  in  Wisconsin?  In  the  face  of  bitter  opposition 
and  a  multitude  of  difficulties  incident  to  the  administration  of  a  new  tax 
law  wo  have  raised  the  first  year  over  $3,500,000.  Of  this  amount  individ- 
uals paid  $1,108,707.02  and  corporations  $2,392,454.44.  In  the  county  of 
Dane,  where  the  capital  of  Wisconsin  is  located,  the  proceeds  of  income 
taxation  amounted  to  over  $111,000,  and  equaled  approximately  the  returns 
from  the  entire  State  of  Virginia.  In  Racine  county  the  yield  was  over 
$164,000;  in  Douglas  county,  almost  $178,000;  and  in  Milwaukee  county 
it  was  over  $1,481,000.  In  the  city  of  Milwaukee  alone  the  income  tax  this 
year  will  amount  to  more  than  the  entire  proceeds  of  income  taxation  in 
any  former  year  in  all  the  States  of  America  put  together.  Thus  as  a 
revenue  producer  the  Wisconsin  experiment  has  been  a  splendid  success. 
When  the  bill  was  framed  it  was  not  anticipated  that  more  than  $1.500,000 
would  be  raised.  Economists  everywhere  declared  that  if  we  should  succeed 
in  raising  more  than  $1,000,000  in  this  way  we  would  have  demonstrated 
that  income  taxation  is  feasible  in  America.  We  have  raised  almost  four 
times  this  amount. 

It  is  sometimes  said  that  the  principle  of  income  taxation  will  never  be 
effectively  enforced  except  by  federal  law.  The  plain  fact  is  that  the 
Wisconsin  income  tax  law  yielded  more  the  first  year  of  its  operation  than 
did  the  first  federal  income  tax,,  although  the  latter  applied  to  the  entire 
country.  The  federal  government  collected  from  income  taxation  in  1863 
but  $2,741,858.  The  balance  in  favor  of  Wisconsin  is  therefore  almost 
$800,000. 

The  personal  property  tax  in  Wisconsin  this  year  -was  $4,100,000.  The 
income  tax  yield  is,  therefore,  only  $600,000  less.  With  a  few  changes  in 
the  law  and  a  more  prosperous  business  year  as  a  basis  to  go  on  next  time 
it  is  likely  that  this  difference  will  wholly  disappear.  Thus,  the  personal 
property  tax  may  be  abolished  in  Wisconsin  at  any  time  the  people  desire 
without  imposing  any  additional  burden  whatever  upon  real  estate. 

In  Milwaukee  county  this  change  could  be  made  at  once  and  land 
taxes  also  reduced;  for  the  proceeds  in  income  taxation  in  that  county 
exceed  personal  property  taxes  for  the  year  by  nearly  $600,000.  In  conse- 
quence of  these  returns  and  the  accompanying  improvement  in  the  adminis- 
tration of  the  general  property  tax,  it  is  now  proposed  to  reduce  the  tax- 
rate  in  Dane  county  from  17£  mills  to  15$  mills  on  the  dollar;  and  in 
Milwaukee  county  it  has  already  been  determined  to  make  a  similar 
reduction  from  almost  17  mills  to  14  mills  on  the  dollar.  These  reductions 
in  the  rate  of  taxation,  together  with  the  exemption  from  the  property  tax 
of  all  except  a  few  cases  of  personalty,  and  the  elimination  of  evasion, 
inequality,  and  dishonesty  in  the  administration  of  tax  laws;  justify  the 
people  of 'Wisconsin  in  sustaining  the  principle  of  income  taxation  as  they 
did  in  the  recent  election,  and  in  regarding  the  enactment  of  the  present 
income  tax  law  as  one  of  the  most  valuable  fiscal  reforms  enacted  in  the 
history  of  the  State. 

Where  does  the  money  raised  by  income  taxation  come  from?  The 
answer  is  in  no  way  doubtful.  It  comes  in  the  main  from  those  who, 
though  enjoying  comfortable  incomes,  have  hitherto  paid  little  or  no  taxes, 


106  INDIANA   UNIVERSITY 

and  from  rich  men  who  have  not  been  paying  their  full  share.  This  is  tin- 
second  big  fact  disclosed  by  the  trial  of  the  Wisconsin  income  tax  law.  It 
tends  to  equalize  ^the  burdens  of  taxation  by  shifting  them,  in  part  at  least. 
from  the  shoulders  of  the  poor  to  those  of  the  well-to-do  and  the  wealthy. 

A  representative  group  of  382  persons  in  Milwaukee  will  pay  this  year 
in  income  taxes  $176,808.  Of  this  number,  88  persons  have  each  a  taxable 
income  less  than  $1,000.  They  are,  therefore,  people  of  only  moderate 
means.  They  will  pay  income  taxes  aggregating  $487,  or  a  little  over  $5 
apiece.  This  is  less  than  3/10  of  1  per  cent  of  the  total  tax  paid  by  the 
group.  One  hundred  and  thirty-nine  persons  belonging  to  this  group  have 
each  a  taxable  income  of  over  $10,000,  and  so  may  be  regarded  as  wealthy. 
Together  they  will  pay  $168,822  income  tax.  This  is  95£  per  cent  of  the 
total  tax  paid  by  the  entire  group.  Twenty-nine  other  persons  have  an 
annual  income  of  more  than  $5,000  but  less  than  $10,000.  They  will  pay 
collectively  $4,210,  which,  added  to  the  taxes  of  those  whose  income  exceeds 
$10,000,  amounts  to  almost  98  per  cent  of  the  entire  tax. 

Analyze  the  facts  on  another  basis  and  the  same  conclusion  follows. 
The  88  persons  with  taxable  income  of  less  than  $1,000,  who  together  now 
pay  $487  income  tax,  last  year  paid  $119  in  personal  property  taxes.  The 
increase  in  their  case  is  therefore  only  $368.  The  29  persons  whose  incomes 
range  between  $5,000  and  $10,000  will  pay  in  the  aggregate  $4,210  income 
tax  this  year,  instead  of  $364  paid  last  year  as  personal  taxes.  The  increase 
is  $3,746.  Most  significant  of  all,  the  139  persons  whose  incomes  are  over 
$10,000  each  will  pay  $168,822  income  tax  this  year,  instead  of  $28,519  paid 
last  year  as  personal  property  taxes.  Here  is  an  increase  of  $140,000. 
Clearly  the  income  tax  reaches  the  wealthy  and  makes  them  pay  in  a  way 
they  never  paid  before 

Thus  the  income  tax,  though  on  its  first  trial,  is  accomplishing  pre- 
cisely what  its  advocates  predicted.  It  reaches  a  new  source  of  revenue. 
It  does  not  increase  taxes;  but  it  equalizes  the  existing  burden  of  public 
contribution  and  distributes  it  more  equitably  than  has  ever  been  done 
before.  In  the  light  of  these  facts  surely  no  honest  man  can  longer  pretend 
to  favor  income  taxation  in  theory,  but  oppose  its  operations  in  practice. 

So  much  for  the  vital  and  principal  innovation  in  the  tax  laws 
of  Wisconsin  producing  a  new  source  of  revenue. 

In  the  administration  field,  we  find  an  equally  interesting  and 
radical  change  for  the  better.  The  serious  weakness  of  our  present 
system  of  taxation,  as  everybody  knows,  is  in  the  personnel  of  the 
assessor.  He  is  usually  a  party  worker  out  of  a  job  who  needs 
the  per  diem  provided  by  the  law.  He  may  know  how  to  shoe  a 
horse  or  turn  a  lathe  and  is  often  a  very  deserving  man  with  a 
needy  family.  He  may  have  bought  a  modest  home  and  furniture 
to  fill  it.  But  he  has  no  knowledge  of  real  estate  or  the  cost  of 
buildings  or  the  value  of  great  stocks  of  merchandise.  Yet  he 
must  go  out  and  make  appraisements  and  secure  the  return  of 
personal  property  which  he  seldom  sees  and  of  which  he  has  no 


TAXATION    IN    INDIANA  107 

idea  of  the  value.  His  visits  are  among  his  friends  or  those  whose 
good  will  he  desires.  He  has  no  property  of  his  own  or  so  little 
that  he  has  no  interest  in  reducing  his  own  burden  by  requiring  just 
returns  from  others.  Often  he  is  "agin  the  government"  and 
in  entire  sympathy  with  the  effort  of  those  who  seek  to  escape 
its  burdens.  In  the  main  he  is  ignorant  and  totally  unqualified 
for  his  job. 

It  is  not  to  be  wondered  at  that  the  personal  property  tax 
system  has  broken  down  in  his  hands.  Everybody  knows  that 
the  fault  lies  in  the  manner  of  his  appointment  and  control.  But 
we  just  must  have  these  little  jobs  to  give  out  to  the  faithful 
trench  workers.  "We  can't  spare  them.  But  Wisconsin  is  at- 
tempting to  do  so.  Professor  Adams  says: 

The  greatest  discovery  of  the  Wisconsin  income  tax  is  the  non-political 
assessor  of  income.  The  law  requires  assessors  of  income  to  be  selected  in 
accordance  with  civil  service  requirements  and  without  regard  to  political 
affiliations.  Among  the  forty-one  assessors  of  incomes  there  are  Republi- 
cans, Democrats,  Socialists,  and  single  taxers.  The  highest  salary  paid  is 
$3,600  a  year,  the  lowest  $800.  The  average  is  almost  exactly  $1,200.  The 
assessors  are  appointed  and  subject  to  dismissal  by  the  tax  commission  and 
serve  for  a  term  of  three  years. 

The  county  officers  known  as  supervisors  of  assessment  have 
also  been  placed  upon  a  civil  service  basis  and  their  work  shows 
a  remarkable  improvement. 

From  all  sources  it  is  learned  that  the  appearance  of  a  man 
of  this  intelligent  character  in  the  role  of  assessor  has  transformed 
the  whole  system  -and  put  it  on  a  self-respecting  business  basis. 
They  are  trying  to  approximate  full  value  appraisements  and  in 
the  first  two  years  the  average  was  raised  from  61  to  83  per  cent 
through  the  intelligent  efforts  of  these  protected  assessors  as  they 
are  called. 

There  is  a  considerable  element  of  •" collection  at  the  source" 
in  the  income  tax  law  which  aids  an  intelligent  assessor.  The 
total  income  assessed  amounted  to  $100,000,000  in  round  figures 
and  the  revenue  derived  under  the  tax  was  $3,472,880.  Sixty- 
eight  per  cent  of  this  came  from  the  corporations  and  only  32  per 
cent  from  firms  and  individuals.  As  the  corporation  is  regarded 
as  the  "source"  which  everybody  is  anxious  to  tap  it  would  seem 
that  it  is  accomplished  in  some  measure. 

Professor  Adams  and  others  who  are  in  charge  of  the  admin- 
istration of  this  new  system  report  that  the  income  law  which  is 
so  reasonable  in  its  exactions  enforced  by  intelligent  assessors  is 


108  INDIANA   UNIVERSITY 

not  unpopular  and  that  the  vast  majority  of  those  who  are  taxed 
under  it  co-operate  with  the  assessor  in  good  spirit  to  reach  a  fair 
and  just  appraisement. 

Much  more  might  be  said  or  borrowed  on  this  subject,  but  I 
wish  to  use  a  moment  of  my  time  to  air  my  own  grievances  and 
remedies,  and  to  attempt  something  constructive. 

Former  Mayor  George  B.  McClellan  of  New  York  in  an  article 
contributed  to  the  Atlantic  some  months  ago  pointed  out  that  with 
the  present  rate  of  increase  in  municipal  expense  in  American 
cities  and  the  universal  escape  of  intangibles  from  taxation,  the 
burden  was  being  laid  on  real  estate  heavier  and  heavier  every 
year,  and  to  such  an  extent  that  it  was  possible  in  some  cities  to 
figure  close  to  a  date  when  real  estate  would  be  confiscated  by  the 
gradual  absorption  of  the  income  through  taxation.  If  this  is  to 
happen,  we  may  as  well  have  single  tax  at  once,  which  exempts  the 
improvements,  and  so  save  something  from  the  wreck. 

But  it  will  not  happen.  The  men  who  make  the  cities,  build 
and  pay  for  its  streets,  increase  its  population,  furnish  the  trade 
to  its  merchants,  deposit  the  money  that  the  banks  and  trust  com- 
panies lend  out,  are  the  masses  of  the  people  who  own  the  real 
estate.  At  present  they  are  paying  more  than  two-thirds  of  the 
cost  of  government;  personal  property,  which  has  an  aggregate 
value  approaching  that  of  real  estate,  pays  less  than  one-third. 

Now  your  real  estate  owner  is  beginning  to  realize  the  gross 
injustice  that  is  working  against  him.  He  wants  a  man  who  has 
$1,000  in  money  to  pay  the  same  proportion  of  his  income  from 
it  that  he  pays  on  his  one-thousand  dollar  house,  so  that  the  taxes 
on  his  house  may  be  reduced  one-half.  To  bring  this  condition 
to  pass  and  to  assist  the  efforts  of  this  association,  he  may  have 
to  organize  a  real  estate  owners'  protective  association,  whose 
business  it  will  be — as  it  seems  to  be  nobody's  now — to  compel  a 
fair  return  on  tangibles. 

Take  my  own  case  for  an  example.  I  have  real  estate  in  Indian- 
apolis of  various  kinds  with  a  rental  value  ranging  from  $8  to 
$150  per  month.  Making  no  allowance  for  the  loss  of  rent  through 
vacancies,  and  nothing  for  depreciation,  I  pay  from  one-fourth 
to  one-sixth  of  my  entire  gross  income  for  taxation.  Why?  Sim- 
ply because  my  neighbor  keeps  his  money  in  intangibles  and  lets 
me  pay  his  part  of  the  expenses  of  government. 

Do  I  blame  him  ?  Not  for  a  moment  under  existing  conditions. 
I  make  four  to  six  per  cent  net  on  my  property.  So  should  he 
on  his  money.  But  he  cannot  if  he  turns  it  in  for  taxation.  They 


TAXATION    IN    INDIANA  109 

would  take  $2.36  out  of  every  $6  of  his  interest.  Of  course  he  has 
to  lie  about  it,  and  tell  the  assessor  he  hasn't  any  money,  and  the 
assessor  who  knows  better  has  to  wink,  watch  him  sign  his  assess- 
ment blank,  and  hasn't  the  face  even  to  ask  him  to  swear  to  it. 

To  treat  me  fairly  my  neighbor  with  the  money  need  only  pay 
one  per  cent  on  the  principal  of  his  money.  That  would  prac- 
tically put  us  on  the  same  basis,  and  everybody  would  be  happy, 
and  he  would  sleep  better  and  with  an  untroubled  conscience. 

The  present  farcical  pretense  of  collecting  $2.36,  with  its  de- 
moralizing effect  on  both  the  taxpayer  and  the  officer  of  the 
la^w  sworn  to  do  his  duty,  ought  to  be  stopped  just  as  soon  as  the 
law  can  accomplish  it  and  before  the  habit  of  lying  undermines 
the  general  moral  sense.  What  with  lying  about  our  property  and 
regarding  international  treaties  as  scraps  of  paper  both  individual 
and  national  honor  are  losing  out.  The  income  tax  of  Wisconsin 
is  an  improvement  over  our  present  situation,  but  it  does  not 
equalize  conditions  in  justice  to  real  estate,  while  a  one  per  cent 
tax  on  money  at  interest  would  meet  with  no  serious  objection  and 
would  be  fair  and  equitable.  What  man  lending  money  on  mort- 
gages or  notes  would  balk  at  paying  one  per  cent  per  annum  in 
lieu  of  all  taxes  ?  In  the  case  of  mortgages  it  would  be  the  simplest 
possible  and  most  certain  scheme  for  collection,  since  the  law  could 
provide  that  the  mortgage  should  not  be  released  of  record  until 
all  taxes  had  been  paid  at  the  rate  of  one  per  cent  per  annum. 
This  plan  would  at  once  divert  millions  of  individual  money  into 
personal  and  mortgage  loans,  the  latter  being  the  most  desirable 
of  all  securities,  especially  for  estates  and  trusts.  Every  dollar 
put  into  foreign  investments  to  escape  taxation  as  is  now  the 
practice  is  a  withdrawal  of  that  much  money  from  home.  Such 
a  tax  would  remove  the  temptation  to  purchase  speculative  stock 
in  which  so  many  losses  are  recorded.  It  would  do  away  with 
the  present  practice  of  evasion  by  which  loans  are  made  through 
the  purchase  of  mortgage  bonds  payable  to  bearer  to  escape  taxa- 
tion. It  is  absurd  to  expect  the  average  resident  of  Indiana  to 
lend  on  real  estate  with  the  present  high  rate  of  taxation.  So 
the  mortgage  field  is  taken  by  foreign  loan  companies  and  mort- 
gage bonds  that  are  concealed  from  taxation.  All  this  would  be 
changed  if  home  money  could  be  put  into  mortgage  securities  and 
personal  loans  on  which  a  tax  of  only  one  per  cent  per  annum 
could  be  levied.  When  the  time  comes  by  amendment  of  our  laws 
that  we  can  do  justice  to  real  estate  as  well  as  to  money  at  interest, 
I  trust  that  some  such  measure  will  receive  consideration. 


110  INDIANA    UNIVERSITY 

THE   OPERATION  OF  THE  NEW  TAX  SYSTEM  IN  OHIO 

O.  C.  LocKHART,1  Professor  of  Political   Economy,   Ohio  State  University 

Ohio's  recent  progress  in  the  taxation  of  property  comprises 
three  steps:  (1)  the  creation  of  a  State  Tax  Commission  having 
general  supervisory  power  over  the  administration  of  tax  laws; 
(2)  the  limitation  of  the  tax-rate  to  a  normal  maximum  of  one 
per  cent,  with  provision  for  increase  under  certain  conditions  to 
not  more  than  one  and  one-half  per  cent;  and  (3)  the  centraliza- 
tion of  the  assessment  machinery  of  the  State  under  the  direction 
of  the  Tax  Commission. 

The  tax  limit  legislation  was  enacted  not  alone  to  limit  local 
expenditures,  but  chiefly  in  the  hope  of  encouraging  the  return 
of  all  property,  and  especially  intangible  property,  for  taxation 
at  its  true  value  in  money.  Coupled  with  considerable  improve- 
ment in  the  work  of  local  assessors,  the  inducement  of  moderate 
tax-rates  did  suffice  to  bring  out  of  hiding  within  three  years 
$100,000,000  worth  of  intangible  property  owned  by  individuals — 
an  increase  of  71  per  cent.  But  the  valuation  of  all  other  forms 
of  property  increased  within  the  same  period  by  176  per  cent; 
so  that  intangible  property  owned  by  individuals  bore  but  3.59 
per  cent  of  all  taxes  levied  on  property  in  the  State  in  1913,  as 
against  5.65  per  cent  in  1910.  Moreover,  under  the  limited  tax- 
rates  obtaining  in  1913,  such  property  actually  paid  one-fourth 
less  in  taxes  than  in  1910. 

Although  the  entire  amount  of  intangible  property  listed  by 
individuals  and  miscellaneous  corporations  in  1912  was  only  $307,- 
000,000,  there  were  in  the  banks  of  the  State  shortly  after  the 
tax-listing  day  $746,000,000  of  deposits,  virtually  all  of  which, 
under  the  ruling  of  the  Attorney-General,  were  legally  taxable 
without  set-off  for  debts.  Time  does  not  now  permit  a  detailed 
estimate  of  other  items  of  intangible  property  in  the  State,  but 
I  venture  to  assert  that  the  total  value  of  such  property  is  at  least 
five  or  six  times  the  value  returned.  On  the  other  hand,  real 
estate  and  the  property  of  public  utilities  appear  to  be  on  the 
duplicate  at  approximately  their  true  value. 

The  tax  limit  law  is  popular,  but  the  average  voter  has  analyzed 
neither  the  tax  returns  nor  the  causes  of  growing  expenditures; 
and  his  instinctive  dislike  for  paying  taxes  led  him  to.  fall  in 
readily  with  the  view  that  the  Smith  law  was  a  powerful  weapon 

'In  the  absence  of  Professor  Lockhart  his  paper  was  read  by  Mr.  Fred  H,  Lemon,  Richmond, 


TAXATION  IN  INDIANA  111 

whereby  the  "taxpayers"  might  hope  to  conquer  in  their  conflict 
with  the  "tax-spenders". 

Over  against  this  popular  view  of  the  act  was  the  stern  fact 
that  all  grades  of  government  in  Ohio,  especially  cities  and  school 
districts,  were  beginning  to  feel  the  pressure  of  the  law  on  their 
incomes;  while  growing  population  and  still  more  rapidly  grow- 
ing demands  for  service  from  their  citizens  made  an  increase  in 
their  expenditures  unavoidable.  It  was  evident,  on  the  one  hand, 
that  some  relief  from  the  rigid  limitations  of  the  tax-rate  law 
must  be  had,  and,  on  the  other,  that  the  amount  and  valuation 
of  property  on  the  grand  duplicate  must  be  augmented  if  anything 
was  to  be  left  of  the  Smith  law. 

The  legislature  of  1913  met  this  situation,  in  the  first  plact, 
by  removing  the  so-called  "interior"  limitation  on  the  amount  of 
the  levy,  which  is  now  limited  only  by  the  maximum  rate.  In 
the  second  place,  it  provided  in  the  so-called  "Warnes  law  for  the 
centralization  of  the  work  of  assessment  under  the  effective  direc- 
tion and  supervision  of  the  Tax  Commission,  which  was  given 
power  to  prescribe  rules  and  regulations  for  the  assessment  of 
property  throughout  the  State. 

In  place  of  the  former  elective  ward  and  township  assessors, 
there  was  created  a  county  assessor  (two  in  the  larger  counties), 
appointed  for  an  indefinite  tenure  by  the  governor,  and  subject 
to  removal  by  the  Tax  Commission.  In  each  county  the  work  of 
reviewing  assessments  was  turned  over  to  a  board  of  three  mem- 
bers, appointed  by  the  Tax  Commission  for  terms  of  three  years. 
The  subordinates  of  these  officials,  but  not  themselves,  are  in  the 
classified  civil  service.  There  is  thus  created  a  body  of  assessing 
officials  who,  by  reason  of  their  tenure  of  office  and  emancipation 
from  local  political  obligations,  occupy  an  unique  position  in  the 
history  of  the  American  general  property  tax.  Moreover,  under 
the  direction  of  the  Tax  Commission,  the  efficiency  of  the  assess- 
ors is  greatly  enhanced  by  such  "team  work"  as  Governor  Cox 
described  in  his  message  to  the  legislature  last  summer.  He  said: 

The  State  Commission  was  able  to  secure  close  co-operation  between 
the  district  officials  in  the  eighty-eight  counties — something  impossible 
under  the  centralized  authority  plan;  mortgages  were  copied  and  ex- 
changed, lists  of  taxable  securities,  with  the  names  and  addresses  of 
holders,  were  distributed,  and  from  this  source  approximately  $100,000,000 
of  taxable  values  were  secured.  There  was  also  an  interchange  of  other 
useful  information.  The  Commission  kept  in  constant  touch  with  the  work 
in  the  counties;  district  assessors  required  daily  reports  of  the  work  from 


112  INDIANA   UNIVERSITY 

their  deputies ;  and  the  district  assessors  reported  weekly  to  the  Tax  Com- 
mission.   In  addition,  three  traveling  examiners  inspected  the  work. 

If  the  new  law  is  to  be  judged  by  its  immediate  effect  on 
property  valuations,  it  must  be  unequivocally  approved.  As  early 
as  midsummer  the  unrevised  returns  of  assessors  indicated  an 
increase  of  approximately  one  billion  dollars,  and  on  this  showing 
the  administration  ventured  to  cut  the  tax-rate  for  State  purposes 
in  half.  A  better  test  of  the  law's  results,  however,  will  be  found 
in  the  relative  increases  in  the  valuation  of  different  classes  of 
property.  For  selected  classes  these  increases  were  as  follows : 

Real  estate 4.2  per  cent 

Personal  property 28 . 4  per  cent 

Banks  and  public  utilities 1.3  per  cent 

Miscellaneous  corporations 27.9  per  cent 

Personalty  of  individuals 79 . 6  per  cent 

Intangible  personalty 180.0  per  cent 

The  most  significant  fact  brought  out  by  these  figures  is  that 
the  principal  increases  have  occurred  in  those  classes  of  property 
whose  valuation  has  heretofore  been  determined  almost  exclusively 
by  the  owner's  return,  viz.,  the  property  of  miscellaneous  corpora- 
tions and  of  individuals.  Moreover,  the  improvement  due  to  cen- 
tralized assessment  is  shown  to  be  most  marked  in  the  case  of 
intangible  property,  the  valuation  of  which  has  been  increased  by 
a  round  half  billion  dollars.  For  the  first  time  in  many  years 
the  share  of  the  property  tax  falling  upon  intangible  property  has 
been  materially  increased.  "What  limited  tax-rates  alone  could 
not  do  has  been  accomplished  with  the  assistance  of  centralized 
assessment.  The  assessment  of  intangible  property  is  still,  how- 
ever, much  less  efficient  than  that  of  other  forms  of  property.  Less 
than  three  weeks  before  tax-listing  day  in  1914,  State  and  National 
Banks  alone  reported  deposits  of  $791,000,000,  while  the  total 
valuation  of  intangible  property  was  $808,000,000.  It  seems  un- 
likely that  more  than  half  the  taxable  intangible  property  in  the 
State  has  been  reached. 

Has,  then,  centralized  assessment  justified  itself  in  Ohio?.  In 
my  opinion  it  has,  emphatically.  In  the  first  place,  it  has  demon- 
strated the  possibility  of  great  improvement  in  assessment  work; 
and  secondly,  it  has  once  more  shown  that  improvements  in  assess- 
ment under  a  listing  system  can  have  but  limited  success  in  dis- 
covering intangible  property,  so  long  as  we  attempt  to  tax  it 
uniformly  with  tangible  property  at  a  rate  which,  though  limited, 
still  takes  one-fourth  or  more  of  the  income  from  investments. 


TAXATION    IN   INDIANA  113 

Now  it  is  just  this  inevitable  inequality  as  between  the  owners  of 
intangible  property  who  pay  and  those  who  do  not  pay  that  con- 
stitutes the  gravest  defect  of  the  general  property  tax;  and  the 
new  law  may  render  its  greatest  service  in  helping  to  impress 
upon  the  voters  the  essential  inequality  and  unworkability  of  the 
general  property  tax. 

Borrowers  are  likely  to  suffer  under  more  rigorous  assessment 
because  lenders  will  tend  to  withdraw  their  funds  from  taxed  in- 
vestment, unless  they  can  get  a  net  interest  return  equal  to  that 
in  untaxed  fields.  More  investments  will  be  made  outside  the 
State  and  in  lines  of  which  there  is  no  public  record,  such  as  cor- 
poration bonds  and  promissory  notes,  and  new  modes  of  their 
concealment  will  be  developed.  Rising  interest  rates  and  a  declin- 
ing proportion  of  intangible  property  on  the  duplicate  will  call 
attention  sharply  to  the  intrinsic  unsatisfactoriness  of  the  general 
property  tax ;  and  thus  the  operation  of  the  Warnes  law  brightens 
the  hope  of  thoroughgoing  tax  reform. 

A  word  in  conclusion  as  to  the  future  of  the  Warnes  law.  In 
the  first  place,  it  is  to  be  hoped  that  the  incoming  Republican 
administration  will  not  lend  its  support  to  proposals  to  restore 
the  old  system,  or  even  to  make  the  county  assessor  an  elective 
officer.  Such  a  thoroughgoing  revision  of  the  tax  system  as  the 
situation  in  Ohio  demands  requires  for  its  successful  operation  an 
efficient  and  experienced  body  of  assessors,  which  .cannot  be  selected 
by  the  voters,  but  only  through  appointment. 

In  the  second  place,  assessing  and  reviewing  officials  should  be 
removed  as  far  as  possible  from  all  political  influences.  The  assess- 
ment of  property  for  taxation  is  too  vital  to  that  equality  of  oppor- 
tunity which  is  the  goal  of  democratic  government  to  permit  any 
taint  of  partisan  bias  to  come  near  the  assessor.  I  believe  that 
under  the  present  law  Ohio  has,  on  the  whole,  an  excellent  body 
of  assessing  officials,  but  the  conditions  of  their  appointment  have 
created,  and  will  perpetuate,  a  suspicion  of  partisanship.  The 
law  should  be  so  amended  as  to  bring  the  district  assessors  and 
members  of  boards  of  complaints  definitely  within  the  classified 
civil  service.  With  these  changes,  the  administrative  machinery 
of  assessment  in  Ohio  will,  in  my  opinion,  justly  deserve  to  become 
a  model  for  other  States. 


8—2902 


114  INDIANA   UNIVERSITY 

THE  REVENUE  SYSTEMS  OF  NEW  YORK  AND 
PENNSYLVANIA 

FRANK  T.  STOCKTON,  Assistant  Professor  of  Political  Economy, 
Indiana  University 

New  York  and  Pennsylvania  lead  the  Union  in  population, 
wealth,  commerce,  and  industry.  On  this  account  alone  a  study  of 
their  revenue  systems  should  prove  interesting1.  Such  a  study  be- 
comes even  more  worth  while,  however,  when  it  is  seen  that  these 
two  States  have  much  to  suggest  to  sister  commonwealths  in  the  way 
of  fiscal  reform. 

This  paper  will  treat  of  the  revenue  systems  of  New  York  and 
Pennsylvania  rather  than  of  their  tax  systems,  as  both  States  derive 
large  and  important  receipts  from  licenses  which  cannot  properly 
be  classed  as  taxes.  On  account  of  the  limitations  of  time,  much 
detail  must  necessarily  be  omitted. 

The  revenue  systems  of  the  two  States  greatly  resemble  each 
other.  In  the  first  place,  New  York  imposes  no  limitation  on  the 
taxing  power  of  the  legislature  save  that  no  person  or  association 
shall  be  exempted  from  taxation  through  any  private  or  local  law. 
The  Pennsylvania  constitution  provides  only  that  "all  taxes  shall 
be  uniform  upon  the  same  class  of  subjects  within  the  territorial 
limits  of  the  authority  levying  the  tax. ' '  The  Pennsylvania  courts 
have  held  that  under  this  clause  progressive  inheritance  taxation 
is  unconstitutional.  A  constitutional  amendment  providing  that 
"the  subjects  of  taxation  may  be  classified  for  the  purpose  of  lay- 
ing graded  or  progressive  taxes"  was  lost  by  a  close  vote  in  1913. 

Not  only  have  these  States  been  free  to  apply  the  classification 
system,  as  they  have  done,  but  they  have  also  succeeded  in  a  marked 
degree  in  divorcing  State  from  local  sources  of  revenue.  In  gen- 
eral, it  might  be  said  that  license  receipts  are  the  only  large  source 
of  revenue  shared  by  both  State  and  local  governments.  Penn- 
sylvania never  did  have  the  general  property  tax  for  State  pur- 
poses. It  did  have,  however,  State  taxes  on  realty,  household  goods, 
live  stock,  and  occupations,  but  these  were  abandoned  to  the  sev- 
eral local  units  by  laws  enacted  from  1866  to  1887.  In  New  York 
the  general  property  tax  for. State  purposes  was  practically  aban- 
doned in  1880.  In  1902  the  rate  was  13/100  mill.  In  1912  it  was  1 
mill;  in  1913,  6/10  mill,  with  a  total  yield  of  about  $6,500,000. 
The  total  State  revenue  in  1913  was  $46,500,000.  For  1914  there  has 
been  no  levy.  The  continuance  of  this  "direct"  tax,  as  it  is  called, 
has  been  due  to  demand  for  revenue  to  meet  the  sinking  fund  and 


TAXATION   IN   INDIANA  115 

interest  requirements  on  canal  and  highway  loans.  Considerable 
fear  is  felt  in  the  State  that  unless  there  is  retrenchment  in  public 
expenditure,  the  levy  on  general  property  must  be  continued.  In 
such  an  event  it  has  been  suggested  that  the  State  tax  be  appor- 
tioned among  the  counties  not  on  the  basis  of  county  assessments 
but  on  the  basis  of  county  revenues.  About  75  per  cent  of  all  local 
revenues  in  New  York  are  raised  by  direct  taxes  on  realty  and  per- 
sonalty. 

Mr.  Remy  asked  me  a  while  ago  what  the  local  rate  in  New  York 
was.  Of  course  it  differs  in  different  places.  For  some  cities  the 
legislature  has  fixed  a  maximum  rate  of  two  per  cent.  In  New  York 
City  the  budget  committee  determines  how  much  shall  be  raised  and 
then  fixes  the  rate  of  levy  according  to  the  amount  to  be  raised. 
Neither  New  York  nor  Pennsylvania,  it  might  be  said,  employs  the 
poll  tax  except  for  local  purposes.  Our  two  States  raise  most  of 
their  revenue  from  four  sources :  taxes  on  corporations,  inheritances, 
personalty  of  specific  types,  and  licenses.  These  will  be  treated  in 
the  order  given. 

CORPORATION  TAXES 

Both  States  have  "organization  taxes"  levied  on  domestic  cor- 
porations and  "license  taxes"  levied  on  foreign  corporations.  In 
Pennsylvania  the  term  "bonus  on  capital  stock"  is  used  to  describe 
such  charges,  which  are  virtually  fees  for  charter  or  business 
privileges. 

The  main  corporation  tax  in  New  York  is  the  c '  annual  franchise 
tax ' '  levied  upon  every  corporation  according  to  the  amount  of  cap- 
ital stock  employed  in  the  State.  While  the  nominal  base  of  the 
tax  is  the  capital  stock,  the  virtual  base  is  the  rate  of  dividends  de- 
clared. Moreover,  the  rate  of  the  tax  varies  with  the  rate  of  divi- 
dends. Manufacturing,  laundry,  and  mining  companies  are  ex- 
empt provided  they  employ  at  least  40  per  cent  of  their  capital  in 
the  State.  On  the  other  hand,  special  rates  of  taxation  apply  to 
banking  institutions,  trust  companies,  and  insurance  companies. 
"Additional"  franchise  taxes  are  imposed  upon  public  utility  cor- 
porations, based  upon  gross  earnings  of  an  intrastate  origin. 
Finally  there  are  taxes  on  "special  franchises,"  i.  e.,  privileges  to 
go  on,  over,  or  under  the  public  streets.  Such  franchises  are  taxed 
as  real  estate  under  the  general  property  tax.  They  are  so  classi- 
fied in  order  that  corporations  with  large  bond  issues  may  not 
escape  taxation  on  the  franchises  by  taking  advantage  of  the  rather 
unique  New  York  plan  of  allowing  debts  to  be  deducted  not  merely 


116  INDIANA    UNIVERSITY 

from  credits  but  from  all  personalty.  If  special  franchises  were 
personalty,  large  bond  issues  would  entirely  offset  them.  The 
franchises  are  assessed  by  the  State  Board  of  Tax  Commissioners, 
who,  however,  make  the  assessment  as  if  for  the  local  governments. 
All  other  forms  of  corporate  taxation  are  administered  by  the  State 
controller  and,  save  for  the  tax  on  bank  stock,  are  for  State  use 
only. 

Pennsylvania  imposes  a  "general  corporation  tax"  on  the  cash 
value  of  shares  on  all  companies  doing  business  within  her  borders. 
Manufacturing  corporations,  except  breweries  and  distilleries,  are 
exempt.  'As  in  New  York,  special  rates  of  taxation  apply  to  bank- 
ing and  trust  companies,  public  utilities  and  insurance  companies. 
All  the  revenue  derived  from  corporation  taxes  goes  to  the  State 
except  that  one-half  the  net  amount  derived  from  taxes  on  foreign 
insurance  companies  is  returned  to  the  cities,  towns,  and  boroughs 
in  proportion  to  premiums  paid  therein. 

A  tax  of  4  mills  on  the  corporate  loans  of  Pennsylvania  con- 
cerns, held  by  residents  of  the  State,  was  adopted  in  1885.  It  was 
intended  that  this  tax  should  fall  upon  the  bondholders,  by  having 
corporation  treasurers  deduct  the  amount  of  tax  from  the  interest 
earned  at  the  time  the  latter  was  payable.  The  purpose  of  the 
tax  has  been  defeated,  however,  by  reason  of  the  fact  that  "up- 
wards of  75  per  cent  of  the  mortgages  made  to  secure  the  payment 
of  corporate  bonds  or  other  indebtedness  contain  a  covenant  pro- 
viding that  the  interest  or  coupon  shall  be  paid  to  the  owner  or 
holder  'free  and  clear  of  all  State  taxes.'  "l  Thus  the  tax  in  most 
cases  falls  upon  the  companies. 

INHERITANCE  TAXES 

Pennsylvania,  in  1826,  adopted  the  first  inheritance  tax  used  by 
any  of  our  commonwealths.  She  now  imposes  a  collateral  inherit- 
ance tax  on  all  property,  both  real  and  personal,  located  in  the 
State,  no  matter  where  the  deceased  person  may  have  lived.  The 
rate  is  5  per  cent  on  the  clear  value  of  the  estate,  with  a  $250 
exemption. 

New  York  adopted  a  collateral  inheritance  tax  in  1885,  and  a 
tax  on  direct  heirs  in  1891.  The  rates  now  run  from  1  to  4  per 
cent  on  direct  inheritances  with  $5,000  exemption  to  5  to  8  per  cent 
on  collateral  inheritances  with  $1,000  exemption.  A  valuable  fea- 
ture of  the  New  York  law  now  is  that  it  takes  the  lead  in  doing 

» Compendium  and  Brief  History  of  Taxation  in  Pennsylvania,  1906,  p.  75. 


TAXATION   IN   INDIANA  117 

away  entirely  with  double  taxation  of  inheritances.  It  pro- 
vides that  the  inheritance  tax  must  be  paid  on  all  tangible  prop- 
erty within  the  State  regardless  of  the  domicile  of  the  deceased. 
Intangibles  located  within  the  State,  however,  are  taxed  only  when 
the  deceased  person  has  been  a  resident  of  the  State.  This  law 
is  in  accord  with  the  plan  drafted  by  a  special  committee  of  the 
International  Tax  Conference.  If  it  were  adopted  by  all  the 
States,  double  taxation  of  inheritances  would  cease.  The  revenue 
produced  in  1913  was  $12,700,000. 

PERSONAL  PROPERTY  TAXES 

The  Pennsylvania  tax  on  corporate  indebtedness  has  been  dis- 
cussed previously.  This  tax  is  collected  by  the  Auditor-General 
and  is  for  State  use  only.  There  is  also  a  tax  of  4  mills  on  munici- 
pal and  county  loans,  collected  by  the  Auditor-General  through  the 
local  officials.  It  is  a  matter  for  serious  debate  whether  any  State 
should  hamper  the  borrowing  power  of  its  minor  political  units  by 
taxing  their  loans.  All  other  moneys  and  credits  in  the  State  are 
subject  to  a  rate  of  4  mills.  The  assessments  are  made  by  local 
officials  and  the  revenues  then  paid  into  the  State  treasury.  Up 
until  the  past  few  years  three-fourths  of  the  revenue  thus  raised 
was  returned  to  the  counties.  Under  present  arrangements,  how- 
ever, the  total  amount  is  returned. 

In  1913  a  tax  of  2.5  per  cent  was  placed  upon  the  value  of  all 
coal  in  the  State  prepared  for  market.  No  other  State  tax  on  tan- 
gible personalty  is  levied.  Since  Pennsylvania  has  no  State  taxes 
on  realty  and  since  her  few  taxes  on  personalty  are  administered 
by  State  officers,  there  is  no  advantage  to  be  gained  in  any  county 
by  general  under-assessment  as  is  the  case  where  the  State  appor- 
tions its  levy  on  general  property  among  the  counties. 

Much  has  been  said  in  recent  years  about  New  York 's  method 
of  taxing  certain  kinds  of  personalty.  Until  1906  mortgages  were 
taxed  as  general  property.  In  that  year,  however,  a  "mortgage 
recording  tax"  of  5  mills  was  provided  for,  to  be  paid  when  any 
mortgage  is  offered  for  record.  Once  paid  the  tax  exempts  the 
mortgage  from  further  State  or  local  assessments.  About  $3,500,- 
000  has  been  raised  annually. 

In  1911  the  Secured  Debt  Law  was  adopted.  It  provided  for 
a  5-mill  tax  also  on  corporate  bonds,  debentures,  and  certain  other 
forms  of  indebtedness.  When  this  tax  is  paid,  the  property  is 
exempt  from  all  further  State  or  local  taxation.  In  1913  a  bill  to 


118  INDIANA    UNIVERSITY 

repeal  the  Secured  Debt  Law  passed  the  New  York  Senate,  but 
failed  in  the  House.  "The  State  Board  advocated  this  repealer, 
on  the  ground  that  the  law  is  too  favorable  to  personal  property. ' ' 
In  1912  the  yield  was  $1,500,000. 

New  York  also  has  a  tax  on  stock  transfers,  which  in  1912  raised 
$3,499,811.  An  automobile  tax  completes  the  list  of  State  taxes  on 
personalty. 

LICENSES 

Both  States  which  we  have  under  consideration  have  an  exten- 
sive system  of  licenses.  Liquor  licenses  are  the  most  productive. 
The  revenue  raised  from  this  source  is  divided  between  the  States 
and  the  counties,  cities,  and  townships,  except  that  in  Pennsylvania 
all  wholesale  liquor  licenses  are  for  State  use  only.  Prior  to  1891 
in  Pennsylvania  all  retail  liquor  license  revenues  went  to  the  local 
governments.  Pennsylvania  also  imposes  licenses  on  wholesale  and 
retail  merchants,  brokers,  brewers,  bottlers,  auctioneers,  peddlers, 
hawkers,  theatres,  circuses,  museums,  eating-houses,  and  dealers  in 
oleomargarine  and  renovated  butter.  New  York  also  requires  State 
licenses  of  dealers  in  convict-made  goods,  pharmacists,  dealers  in 
alcohol  for  industrial  uses,  steamboats,  race-meetings,  and  peddlers. 
New  York  City  in  addition  imposes  a  host  of  local  licenses.  State 
revenue  from  licenses  in  New  York  comprises  the  largest  single 
item  in  the  list  of  receipts,  providing  $15,664,997.82  out  of  a  total 
of  $47,696,551.55  in  1912. 

RECENT  CHANGES  IN  LOCAL  TAXATION 

The  New  York  City  charter  has  recently  been  amended  to  pro- 
vide that  "a  building  in  course  of  construction  commenced  since 
the  preceding  past  day  of  October  (assessment  day)  and  not  ready 
for  occupancy,  shall  not  be  assessed."  This  law  was  designed  to 
obviate  the  difficulties  of  assessment  in  such,  a  case  and  to  encour- 
age new  buildings. 

Throughout  the  entire  State,  by  recent  law,  "household  furni- 
ture and  personal  effects  to  the  value  of  $1,000"  are  now  exempt. 
The  previous  figure  had  been  $250.  There  is  much  to  be  said  in 
favor  of  exempting  from  taxation  all  goods  of  a  purely  consumptive 
nature. 

Three  laws  were  passed  in  New  York  in  1912,  designed  to  en- 
courage the  planting  of  trees  by  reducing  the  burden  of  taxation. 
One  of  these  provides  that  certain  lands,  properly  reforested,  shall 
be  exempted  from  taxation  for  thirty-five  years.  If  not  fully  re- 


TAXATION    IN    INDIANA  119 

forested  the  land  is  assessed  at  '  *  50  per  cent  of  the  assessable  valua- 
tion of  such  land  exclusive  of  any  forest  growth  thereon"  for 
thirty -five  years.  After  the  thirty-five  year  period  the  land,  if  used 
exclusively  as  a  forest,  is  assessed  at  its  land  value  only,  the  timber 
being  exempt  except  that  if  the  timber  is  cut  before  the  tax  has 
been  paid  for  five  years,  the  timber  shall  pay  a  5  per  cent  stumpage 
tax.  The  other  two  laws,  applying  to  smaller  tracts  of  land,  are 
somewhat  similar  in  character. 

In  the  election  of  1912  the  people  of  New  York  adopted  by 
a  vote  of  practically  two  to  one  an  amendment  to  the  constitution 
granting  cities  the  privilege  of  excess  condemnation.  Another 
amendment  was  also  adopted  which  will  permit  condemnation  pro- 
ceedings to  be  held  by  the  supreme  court  and  thus  avoid  the  delay 
and  expense  of  commissioners. 

In  Pennsylvania  an  amendment  to  the  second-class  cities  law  (which 
applies  to  Pittsburgh  and  Scranton)  provides  that  in  those  cities  the  rate  of 
taxation  on  buildings  shall  be  reduced  10  per  cent  below  the  rate  on  other 
property,  every  third  year,  the  reduction  beginning  in  1914,  until  in  the 
year  1925  buildings  will  be  taxed  only  50  per  cent  of  the  rate  upon  other 
property. 

This  Pennsylvania  statute  is  the  first  enactment  in  the  United  States 
which  follows  the  example  set  twenty  years  ago  by  the  provinces  of  North- 
western Canada  in  providing  for  the  gradual  reduction  of  the  tax  on  build- 
ings. It  was  advocated  by  the  city  administration  and  civic  organizations 
of  Pittsburgh.  The  reasons  given  were  that  it  would  encourage  the  erection 
of  buildings,  diminish  the  congestion  of  population,  and  by  increasing  the 
tax  burden  upon  vacant  land,  increase  the  available  building  sites  for 
homes  and  industry.2 

It  might  be  noted  also  that  in  Pennsylvania  personal  property 
is  exempt  from  local  taxation  (live  stock  is  not  exempt  except  in 
Pittsburgh) .  Merchandise  and  machinery  have  long  been  exempt, 
and  a  law  applying  to  second-class  cities  was  enacted  in  1911  which 
exempted  all  machinery  that  had  hitherto  been  taxed  as  part  of  real 
estate. 

GENERAL  PROPERTY  ASSESSMENT  IN  NEW  YORK 

In  conclusion  a  word  needs  to  be  said  about  New  York 's  method 
of  conducting  local  assessments  of  property.  The  "listing"  sys- 
tem lias  been  abolished  except  in  the  case  of  corporations.  The 
local  taxing  officers,  after  proper  investigation,  assess  property- 
holders  for  what  they  think  they  are  worth.  Opportunity  is  then 
given  on  "grievance  day"  in  August  for  those  who  think  their 

5  Twenty-third  Annual  Report,  New  York  Tax  Reform  Association,  1913,  p.  6. 


120  INDIANA   UNIVEESITY 

assessments  are  too  high  to  ''swear  off  their  taxes."  An  attempt 
made  in  1913  to  revert  to  the  "listing"  system  was  defeated  in  the 
legislature. 

It  is  my  hope  that  the  above  conveys  some  idea  as  to  the  reve- 
nue systems  of  these  two  great  States.  There  are  undoubtedly 
weak  points  in  each,  but,  on  the  whole,  they  present  a  general  pro- 
gram which,  as  to  sound  fiscal  policy,  is  unrivaled  anywhere  in  the 
United  States.  In  them  the  general  property  tax  has  been  sup- 
planted by  specific  taxes  which  yield  abundant  revenues  and,  for 
the  most  part,  give  thorough  satisfaction.  Neither  State  enjoys 
the  income  tax,  which  is  theoretically  the  fairest  form  of  taxation. 
Yet  the  classification  system  is  worked  out  so  as  to  impose  the  tax 
levy  on  various  kinds  of  property  in  approximate  proportion  to 
their  income-producing  ability. 

WHAT  NEW  ENGLAND  IS  DOING  TO  MODERNIZE 
TAXATION 

B.  I.  LEWIS  of  the  Indianapolis  News 

New  England  is  the  home  of  American  taxation.  In  New  Eng- 
land, in  colonial  days,  was  devised,  or  adapted  to  meet  American 
conditions  then  existing,  the  general  property  tax  system.  Other 
States  on  the  Atlantic  adopted  the  system  not  later  than  immedi- 
ately after  the  Revolution.  It  expanded  with  the  nation. 

In  light  of  these  historic  facts,  the  impressive  feature  of  tax  dis- 
cussion and  legislation  in  New  England  now  is  the  .general  endorse- 
ment of  the  declaration  of  the  1910  International  Tax  Conference 
that  "the  general  property  tax,  under  higher  rates  of  taxation 
caused  by  the  increase  of  public  expenditures  ....  has  broken 
down. ' ' 

In  New  England  this  verdict  is  not  speculative.  It  is  officially 
recorded  in  almost  every  State.  Permit  me  first  to  quote  Charles  A. 
Andrews,  Deputy  Tax  Commissioner  of  Massachusetts : 

When  this  system  was  established  in  this  country,  and  for  many  years 
thereafter,  securities,  credits,  and  cash  were  a  comparatively  small  part  of 
the  property  of  the  .people.  What  property  there  was  consisted  largely  of 

real  estate,   merchandise,   cattle,   and   other  domestic  animals 

The  determination  of  ownership  and  of  value  was  comparatively  easy  and 

thus  the  general  property  tax  worked  fairly  well Its  failure 

has  become  increasingly  evident  with  the  increase  of  moneyed  capital  in 
the  form  of  cash,  credits,  stocks,  bonds,  et  cetera. 


TAXATION   IN   INDIANA  121 

In  brief,  the  general  property  tax  was  devised  for  a  simpler  age. 
Mr.  Andrews  well  points  out  that  two  other  things  have  changed. 
Tax-rates  have  gone  up  and  rates  of  return  on  money  have  come 
down.  He  then  remarks : 

Patriotism  may  be  willing  in  times  of  peace  to  give  ten  per  cent  of 
income  to  government,  but  not  forty  or  fifty  per  cent  or  more. 

Let  me  quote  again  from  his  summary  of  New  England  condi- 
tions : 

Who  can  look  at  the  tax  statistics  of  his  own  city  and  fail  to  be 
appalled  at  its  poverty  in  personal  property — if  he  believes  the  figures  tell 
a  true  story?  ....  The  fact  is  that  in  Massachusetts  and  in  the  other 
States  only  a  small  part  of  the  intangible  personal  property  which,  by  the 
constitution  and  the  law,  is  subject  to  taxation,  is  actually  taxed.  And  the 
primary  reason  for  this  failure  to  tax  is  not  lax  administration.  The 
primary  reason  is  that  the  law  requires  an  unreasonable  and  an  impossible 
thing.  It  is  unreasonable  to  attempt  to  take,  as  tax,  so  large  a  part  of  the 
income;  it  is  impossible  to  tax  successfully  at  high  rates  those  things 
which  are  so  easily  concealed  as  are  cash,  credits,  and  securities. 

Now  let  us  step  from  the  office  of  the  State  Tax  Commissioner  of 
Massachusetts  to  Harvard  University.  Again  I  quote  that  oft- 
quoted  axiom  stated  by  Professor  Bullock : 

The  method  and  rates  of  taxation  must  be  adjusted  to  the  requirements 
of  the  various  classes  of  taxable  objects ;  no  rate  upon  any  class  should  be 
higher  than  can  be  collected  with  reasonable  certainty.  No  rate  should  be 
so  high  as  to  drive  out  of  the  community  persons  or  capital  or  industry, 
and  any  rate  that  exceeds  what  a  class  of  taxable  objects  will  bear  must 
result  in  loss  of  revenue,  injury  to  industry,  and  such  general  demoraliza- 
tion as  accompanies  widespread  evasion  of  the  law. 

The  proof  of  the  fact  that  New  England,  the  home  of  the  gen- 
eral property  tax,  has  found  this  statement  to  be  true  is  best  indi- 
cated by  the  official  record.  I  summarize  it,  as  follows : 

Maine,  in  1913,  by  a  vote  of  its  people,  adopted  an  amendment 
to  the  constitution,  which  provides  for  classification  of  intangibles 
for  purposes  of  taxation.  This  amendment  followed  two  amend- 
ments in  1911,  the  first  exempting  mortgage  loans  from  taxation, 
the  second  providing  for  the  division  of  land  and  building  values 
in  assessing  real  estate. 

Rhode  Island,  in  1912,  completely  overhauled  its  taxing  system. 
The  new  law  establishes  a  State  Tax  Department  with  advisory 
and  supervisory  powers.  It  imposes  a  State  Tax  on  the  "corpo- 
rate excess"  of  banking  institutions,  manufacturing  and  mercan- 


122  INDIANA    UNIVERSITY 

tile  corporations,  and  upon  gross  earnings  of  public  service  cor- 
porations. Securities  of  such  corporations  and  savings  deposits 
are  exempted  from  local  taxation.  A  collateral  inheritance  tax 
was  adopted. 

The  feature  of  the  new  law,  however,  which  attracts  the  most 
general  attention  is  that  one  which  relieves  intangible  personal 
property,  including  mortgages,  from  the  operation  of  the  general 
property  tax  and  fixes  a  flat  rate  of  40  cents  a  hundred  dollars 
on  that  class  of  property.  From  the  1914  report  of  the  Rhode 
Island  Board  of  Tax  Commissioners,  I  quote: 

There  lias  been  misunderstanding  and  confusion  which  is  always 
incident  to  the  inauguration  of  a  complete  new  system Intangi- 
bles, together  with  savings  and  participation  accounts  and  reserve  funds, 
the  corporate  excess  of  manufacturing,  mercantile,  and  miscellaneous  cor- 
porations, the  stock  of  banks  and  trust  companies  and  the  securities  of 
public  service  corporations,  obtained  by  capitalizing  their  gross  receipts 
tax  on  a  basis  of  40  cents  a  $100,  give  the  total  amount  of  intangibles 
paying  taxes  in  this  State  as  more  than  $460,000,000.  This  amount  was 
never  even  approached  before  and  it  exceeds  the  total  local  valuation  of 
the  State  for  1904  by  more  than  $16,000,000. 

I  have  just  received  a  letter  from  Z.  W.  Bliss,  chairman  of 
the  Rhode  Island  Board  of  Tax  Commissioners,  in  which  he  says 
the  "listing  of  intangibles"  has  increased  to  $473,000,000.  This 
is,  he  points  out,  within  $4,000,000  of  the  total  assessed  valuation 
of  the  State  in  1906. 

This  showing  is  particularly  interesting  to  Indiana  whose  State 
Board  of  Tax  Commissioners  has  just  reported  a  decrease  of 
$5,404,747  of  easily  evasive  intangibles  during  the  last  year. 

A  comparison  between  Indiana  and  Rhode  Island  here  is  per- 
tinent. Intangibles  in  Indiana  largely  center  in  towns  and  cities. 
The  Indiana  Tax  Commissioners  say  the  rates  in  these  towns  and 
cities  exceed  an  average  of  3J  per  cent.  Five  per  cent  is  the 
average  earning  power  of  the  large  bulk  of  taxable  intangibles. 
Three  and  one-half  per  cent  is  70  per  cent  of  a  5  per  cent  income. 
The  evasion  of  the  $5,404,747,  figured  on  the  3-J  per  cent  basis, 
reduces  public  revenues  upward  of  $190,000. 

The  taxation  at  40  cents  on  each  $100  of  valuation  of  intangi- 
bles in  Rhode  Island  takes — on  the  same  basis  of  figuring — only 
8  instead  of  70  per  cent  of  income,  but  note  the  result  as  compared 
with  the  loss  of  $190,000  of  public  revenue  reported  in  Indiana 
for  one  year.  In  the  letter  just  received  from  Chairman  Bliss  he 
says:  "The  net  increase  in  public  revenues,  both  local  and  State, 


TAXATION    IN   INDIANA  123 

due  to  the  operation  of  the  Tax  Act  of  1912,  is  approximately 
$1,300,000,  at  the  end  of  the  first  two  years." 

I  just  received  this  morning  a  letter  from  W.  B.  Fellows,  State 
Tax  Commissioner  of  the  State  of  Rhode  Island,  in  which  he  com- 
ments on  that  exemption  on  the  taxation  of  mortgages,  and  out 
of  the  mass  of  material  sent  me  I  want  to  read  this: 

•  Some  years  ago  New  Hampshire  municipal  obligations  were  exempted 
from  taxation  when  held  in  the  municipalities  issuing  them.  In  1909  an 
effort  was  made  to  exempt  notes  secured  by  mortgages  on  New  Hampshire 
real  estate,  the  rate  of  interest  being  five  per  cent  or  less.  The  law  was 
enacted  finally  in  1911.  Double  taxation  was  recognized,  but  the  most 
appealing  argument  was  that  it  would  release  home  money  to  meet  home 

needs This  exemption  has  already  reduced  the  rate  of  interest 

on  such  loans  from  six  to  five  per  cent  or  less. 

Connecticut  has  deserted  the  property  tax.  There,  too,  intan- 
gibles seem  to  have  been  the  straw  that  broke  the  camel's  back  and 
forced  a  new  system  which  includes  taxation  of  corporate  excess, 
taxation  of  utilities  on  the  earnings  plan,  inheritance  taxation — • 
with  duplication  cut  out,  etc.  Bonds,  notes,  and  other  choses  in 
action  registered  with  the  State  Treasurer  are,  as  in  Rhode  Island 
now,  taxed  at  the  uniform  rate  of  40  cents  on  the  $100  and  are 
exempt  from  other  taxation.  This  classification  includes  mort- 
gages— both  those  on  Connecticut  real  estate  and  on  real  estate 
outside  the  State,  net  credits,  cash  on  deposit,  and  all  other  cash 
except  specie.  Shares  in  corporations  are  not  included  since  they 
are  entirely  exempt  in  the  hands  of  the  Connecticut  holder.  State 
Tax  Commissioner  William  H.  Corbin  in  a  letter  just  received  calls 
attention  to  the  fact  that  Connecticut's  constitution  has  no  men- 
tion of  the  word  "tax."  He  makes  the  interesting  comment: 
"Such  freedom  from  constitutional  restrictions  and  limitations  is 
very  advantageous  for  the  State. ' ' 

Vermont  and  New  Hampshire  have  made  modernizing  changes. 
The  details  will  have  to  be  eliminated.  It  is  interesting  to  note 
one  feature  of  the  New  Hampshire  law.  In  many  States  there 
are  strong  movements  to  stop  that  kind  of  duplication  of  taxation 
of  mortgaged  real  estate  which  consists  of  taxation  of  both  the 
property  and  the  mortgage.  One  objection  is  against  "duplication 
of  taxation,"  but  the  more  potent  argument  is  that  the  double 
taxation  falls  on  the  holder  of  the  real  estate  in  higher  interest 
rates.  In  Indiana  and  other  States  it  also  serves  to  deprive  home 
people  from  lending  money,  as  was  shown  at  the  Bloomington  con- 
ference. New  Hampshire  has  provided — in  her  effort  to  relieve 


124  INDIANA   UNIVERSITY 

the  interest-paying  farmers — that  mortgages  bearing  a  rate  of 
interest  of  5  per  cent  or  less  shall  be  exempt  from  taxation. 

Thus,  finally,  we  come  to  Massachusetts.  Massachusetts  has 
a  somewhat  elaborate  taxing  system.  Besides  more  or  less  conven- 
tional corporation  and  inheritance  taxes,  and  a  tax  on  certain 
incomes  above  $2,000,  there  is  a  relic  of  early  colonial  taxation 
in  the  form  of  certain  business  and  occupational  taxes.  In  admin- 
istration, there  is  conferred  on  assessors  "unusual  and  extraordi- 
nary powers"  including  those,  practically,  of  doomage. 

However,  the  basis  of  the  Massachusetts  taxation  system  is'  the 
general  property  tax.  The  present  situation  in  Massachusetts  is  of 
special  interest  to  Indiana.  The  constitutional  limitations  in  both 
States,  while  stated  differently  in  actual  words,  seem  to  be  similar. 
In  Massachusetts  the  stipulation  is  "  to  impose  and  levy  proportion- 
al and  reasonable  assessments,  rates,  and  taxes."  In  Indiana  the 
fundamental  declaration  is  for  a  *  *  uniform  and  equal  rate  of  assess- 
ment and  taxation. ' ' 

William  D.  jT.  Trefry,  the  scholarly  Tax  Commissioner  of  Massa- 
chusetts, coined  the  phrase :  "  If  a  tax  system  is  out  of  joint  with 
industrial  and  economic  facts,  it  must  be  changed,  not  they."  He 
was  referring  at  the  time  to  the  "  un workability "  of  the  Massa- 
chusetts general  property  tax  in  these  modern  times  when  such  a 
large  part  of  property  has  taken  tax-evading  forms  and  when  tax- 
rates  have  soared.  In  his  last  official  report,  dated  January  1,  1914, 
he  says: 

The  framers  of  the  tax  system  now  existing  in  Massachusetts  never 
went  on  record  as  approving  the  taxation,  at  rates  as  high  as  $18,  $20,  and 
$25  on  the  thousand  of  capital  value,  of  credits  and  securities  which  bring 
to  the  owner  no  more  than  $40,  $50,  or  $60  of  annual  income. 

It  would  be  interesting  to  hear  what  this  eminent  tax  student 
and  outspoken  State  Commissioner  would  say  of  conditions  in  In- 
diana. The  tax-rates  in  towns  and  cities  in  Massachusetts  range 
from  only  one-third  of  one  per  cent  up  to  2.7  per  cent,  the  average 
being  1.8  per  cent.  The  tax-rates  in  Indiana  towns  and  cities  range 
from  practically  2  per  cent  to  5  per  cent,  and  the  average,  accord- 
ing to  the  State  Tax  Board,  is  in  excess  of  3^  per  cent.  In  Massa- 
chusetts the  average  taxation  of  an  income  derived  from  5  per  cent 
intangibles  is  therefore  36  per  cent  and  that  is  pretty  stiff  income 
taxation.  The  average  in  Indiana,  figured  on  the  same  basis,  is  70 
per  cent.  Even  when  allowance  is  made  for  a  25  per  cent  under- 
assessment, it  is  still  in  excess  of  50  per  cent.  In  some  towns 


TAXATION   IN   INDIANA  125 

and  cities,  that  are  far  above  the  average,  the  rate  is  practically 
confiscatory. 

This  year  the  Massachusetts  legislature  passed  a  law  providing 
for  the  registration  of  bonds,  and  providing  that  bonds,  secured  by 
tangible  property  that  is  actually  taxed,  may  be  exempted  from 
general  taxation  for  one  year  on  the  payment  of  $3  a  thousand  of 
value.  In  other  words,  a  specific  tax  of  30  cents  a  hundred  has  been 
provided  for  bonds.  The  law  has  just  gone  into  effect.  Commis- 
sioner Trefry  says  the  registration  will  be  heavy  just  as  soon  as  the 
constitutionality  of  the  act  is  established. 

The  evasion  has  been  heavy.  It  is  very  simply  summarized. 
The  State  is  morally  certain  that  $4,600,000,000  of  intangible  per- 
sonal property  is  held  in  the  State.  This  year  there  was  only 
$400,000,000  of  intangible  property  on  the  tax-duplicates,  that  is, 
just  about  one-eleventh.  Four  billion  dollars  of  property  is  escap- 
ing taxation  and  leaving  the  burden  on  that  which  can  not  escape. 

Two  State  Commissions,  one  in  1896,  another  in  1908,  made  ex- 
haustive, careful  investigations.  Both  condemned  the  attempt  to 
tax  all  classes  of  property  at  uniform  rates.  The  trouble  is  that 
the  tax  system  is  ' '  out  of  joint  with  industrial  and  economic  facts. ' ' 
Those  economic  facts  cannot  be  changed.  If  money  earns  only  5 
per  cent  it  is  not  going  to  remain  where  there  is  40  to  5.0  per  cent 
taxation  of  it;  or  it  is  going  to  get  into  hiding  or  into  non-taxable 
forms.  That  rule  is  seen  operating  in  Indiana  where  some  men  of 
large  means  have  moved  themselves  to  other  ^ States  and  others  have 
sent  their  money  out  of  Indiana,  while  still  more  have  put  it  into 
non-taxable  forms  or  have  sequestered  it. 

Massachusetts  has  done  one  thing  under  her  constitutional  limi- 
tations to  escape  the  conditions  produced  in  Indiana  by  submitting 
recorded  mortgage  loans  to  the  general  property  tax.  Massachu- 
setts people  can  loan  Massachusetts  people  Massachusetts  money. 
As  far  back  as  1881  Massachusetts  enacted  a  law  that,  as  it  works 
out,  exempts  mortgages  from  taxation.  It  probably  means  lower 
interest  rates  than  would  otherwise  be  the  case. 

After  admitting  in  his  last  report  to  the  Massachusetts  legisla- 
ture that ' '  billions  of  dollars  worth  of  taxable  property  is  untaxed ' ', 
Commissioner  Trefry  says: 

If  Massachusetts  were  the  only  community  which  had  failed  to  admin- 
ister successfully  the  general  property  tax,  it  would  behoove  us  to  mend 
our  ways  without  delay.  Self-respect  would  have  led  us  to  do  this  long 
ago.  As  a  matter  of  fact,  however,  I  have  yet  to  learn  of  a  single  State 
which  has  established  an  administrative  system  that  has  been  able  to  tax 


126  INDIANA   UNIVEKSITY 

any  larger  portion  of  the  personal  wealth  of  its  inhabitants  than  has  been 
taxed  here  in  Massachusetts. 

He  then  points  to  the  list  of  States  that  have  already  abandoned 
the  general  property  tax,  and  to  the  nineteen  that  have  constitu- 
tional amendments  pending  now.  The  Massachusetts  legislature, 
at  its  last  session,  adopted  an  amendment,  to  be  resubmitted  to  the 
1915  legislature  for  ratification,  providing  for  the  levying  of  in- 
come taxes. 

A  final  word  as  to  the  failure  of  the  general  property  tax  in 
Massachusetts,  Indiana,  and  in  other  States.  It  is  all  in  the  resolu- 
tion of  the  1910  International  Tax  Conference.  It  answers,  it 
seems  to  me,  the  issue  of  whether  the  fault  is  in  the  system  or  in 
administration,  which  was  raised  at  the  Bloomington  conference. 
That  resolution  is  as  follows: 

Resolved,  That  this  conference  finds  that  the  taxation  of  personal 
property  has  not  been  more  successful  under  strict  administration  than 
under  lax;  that  States  which  have  modified  or  abandoned  the  general 
property  tax  show  no  intention  of  returning  to  it ;  and  that  in  States 
where  the  general  property  tax  is  required  by  constitutional  provision, 
there  is  a  growing  demand  for  the  repeal  of  such  provisions. 

THE  CALIFORNIA  SYSTEM  OF  TAXATION  AND  WHAT 
THE  PEOPLE  OF  INDIANA  MAY  LEARN  FROM  IT 

Uz  McMuRTRiE,  Treasurer  of  Grant  County 

When  the  people  of  Indiana  finally  arrive  at  the  determination 
to  have  a  modern  and  more  equitable  system  of  taxation  'Jhey  will 
do  well  to  look  toward  California  for  practical  suggestions  for 
building  the  new  scheme.  There  we  find  a  great  State  that  has  al- 
most wholly  discarded  early  methods  and  that  has  substituted  new 
ones  which  are  intended  to  reach,  in  a  just  manner,  new  classes  of 
intangible  wealth  developed  by  the  latter  day  civilization. 

An  amendment,  adopted  in  1910,  to  the  California  constitution 
affected  the  separation  of  State  and  local  taxation.  All  public 
service  corporations,  insurance  companies,  and  banks  were  relieved 
from  the  burdens  of  local  taxation  and  were  set  aside  and  named) 
for  the  exclusive  use  of  the  State  as  proper  sources  of  revenue. 
Article  13,  Section  14  of  the  constitution  is  here  quoted  in  explana- 
tion of  detail.  It  states : 

Taxes  levied,  assessed,  and  collected,  ....  upon  railroads,  includ- 
ing street  railways,  whether  operated  in  one  or  more  counties;  sleeping- 
car,  dining-car,  drawing-room  car,  and  palace-car  companies;  refrigerator, 
oil,  stock,  fruit,  and  other  car-loaning  and  other  car  companies  operating 


TAXATION    IN    INDIANA  127 

upon  railroads  in  this  State;  companies  doing  express  business  on  any 
railroad,  steamboat,  vessel,  or  stage  line  in  this  State ;  telegraph  com- 
panies ;  telephone  companies ;  companies  engaged  in  the  transmission  or 
sale  of  gas  or  electricity;  insurance  companies,  banks,  banking  associa- 
tions, savings  and  loan  societies,  and  trust  companies ;  and  taxes  upon  all 
franchises  of  every  kind  and  nature,  shall  be  entirely  and  exclusively  for 
State  purposes 

(a)  All  railroad  companies,  including  street  railways,  whether 
operated  in  one  or  more  counties;  all  sleeping  car,  dining-car,  drawing- 
room  car,  and  palace  car  companies,  all  refrigerator,  oil,  stock,  fruit,  and 
other  car-loaning  and  other  car  companies,  operating  upon  the  railroads 
in  this  State ;  all  companies  doing  express  business  on  any  railroad,  steam- 
boat, vessel  or  stage  line  in  this  State;  all  telegraph  and  telephone  com- 
panies; and  all  companies  engaged  in  the  transmission  or  sale  of  gas  or 
electricity  shall  annually  pay  to  the  State  a  tax  upon  their  franchises 
.  .  .  .  and  all  property  used  exclusively  in  the  operation  of  their  busi- 
ness in  this  State,  computed  as  follows:  Said  tax  shall  be  equal  to  the 
percentage  hereinafter  fixed  upon  the  gross  receipts  from  operation  of  such 
companies  and  each  thereof  within  this  State.  When  such  companies  are 
operating  partly  within  and  partly  without  this  State,  the  gross  receipts 
within  this  State  shall  be  deemed  to  be  all  receipts  on  business  beginning 
and  ending  within  this  State,  and  a  proportion,  based  upon  the  proportion 
of  the  mileage  within  the  State  to  the  entire  mileage  over  which  such  busi- 
ness is  done,  of  receipts  on  all  business  passing  through,  into  or  out  of  this 
State. 

The  percentages  above  mentioned  shall  be  as  follows :  On  all  railroad 
companies,  including  street  railways,  4  per  cent;  on  all  ....  car 
companies,  3  per  cent ;  and  all  companies  doing  express  business  .... 
2  per  cent;  on  all  telegraph  and  telephone  companies,  3*  per  cent;  on  all 
companies  engaged  in  the  transmission  of  gas  or  electricity,  4  per  cent. 

(&)  Every  insurance  company  or  association  doing  business  in  the 
State  shall  annually  pay  to  the  State  a  tax  of  1£  per  cent  upon  the  amount 
of  the  gross  premiums  received  upon  its  business  done  in  the  State,  less 
return  premiums  and  reinsurance  in  companies  or  associations  authorized 
to  do  business  in  this  State :  Provided,  That  there  shall  be  deducted  from 
said  1£  per  cent  upon  the  gross  premiums  the  amount  of  any  county  and 
municipal  taxes  paid  by  such  companies  on  real  estate  owned  by  them  in 
this  State. 

(c)  The  shares  of  capital  stock  of  all  banks  ....  shall  be  as- 
sessed ....  by  the  State  Board  of  Equalization  ....  and  taxed 
.  .  .  .  an  annual  tax,  payable  to  the  State,  of  1  per  cent  upon  the  value 
thereof.  The  value  of  each  share  of  stock  in  each  bank  shall  be  taken  to 
be  the  amount  paid  in  thereon,  together  with  its  pro  rata  of  the  accumu- 
lated surplus  and  undivided  profits There  shall  be  deducted 

from  the  value  as  defined  above,  the  value  as  assessed  for  county  taxes,  of 
any  real  estate  ....  owned  by  such  banks,  and  thus  taxed  for  county 
purposes 

The  ratos  of  taxation  fixed  in  this  section  shall  remain  in  force  until 
changed  by  the  legislature,  two-thirds  of  all  the  members  elected  to  each  of 
the  two  bouses  voting  in  favor  thereof 


128  INDIANA   UNIVERSITY 

Until  the  year  1918  the  State  shall  reimburse  any  and  all  counties 
which  sustain  loss  of  revenue  by  the  withdrawal  of  railroad  property  from 
county  taxation.  The  legislature  shall  provide  for  reimbursement  from  the 
general  funds  of  any  county  to  districts  therein  where  loss  is  occasioned  in 
such  districts  by  the  withdrawal  from  local  taxation  of  property  taxes  for 
State  purposes  only. 

Several  of  the  above  constitutional  provisions  are  unusual  and 
worthy  of  our  special  notice : 

1.  Of  the  various  States  which  have  separated  the  sources  of 
State  and  local  revenue,  few  designate  banks  as  a  subject  for  State 
levy.     The  common  argument  advanced  in  favor  of  naming  inter- 
local  public  service  corporations  as  proper  sources  of  State  taxation, 
that  is,  that  they  are  ' '  State ' '  in  character  and  have  no  distinct  lo- 
cal situs,  can  hardly  with  correctness  be  applied  to  banking  institu- 
tions.    However,  it  is  probable  that  the  public  service  corporations 
of  California  were  insufficient  to  yield  the  proper  amount  of  in- 
come for  the  State,  and  for  this  reason  the  banks  were  appropriated 
as  a  State  revenue  source. 

2.  A  wise  provision  seems  to  be  the  one  fixing  the  tax  upon  the 
gross  receipts  of  the  public  service  corporations,  rather  than  upon 
the  appraised  valuation  of  property.     This  eliminates  the  trouble- 
some appraisement  of  this  class  of  corporations  made  annually  in 
Indiana  and  other  States  employing  the  general  property  tax. 

3.  The  provision  requiring  a  two- thirds  vote  of  all  the  members 
of  both  houses  of  the  legislature  is  intended  of  course  as  a  reason- 
able restraint  upon  unjust   discrimination   against   corporations. 
Here  it  might  be  added  that  the  legislature  of  1913  increased  the 
rate  of  taxation  upon  the  gross  receipts  of  railroads  f  of  1  per  cent ; 
of  -car  companies  1  per  cent;  telegraph  and  telephone  companies 
7/10  of  1  per  cent ;  of  gas  and  electric  companies  6/10  of  1  per  cent, 
and  of  insurance  companies  \  of  1  per  cent  upon  the  gross  pre- 
miums. 

4.  Another  commendable  proviso  is  the  one  under  which  the 
minor  taxing  districts  are  reimbursed  during  a  period  of  seven 
years  for  the  loss  of  revenue  occasioned  by  the  withdrawal  of  cor- 
poration property  from  local  taxation.     This  evidently  was  a  clever 
means  of  squelching  opposition  to  the  plan  of  separation  from  the 
districts   in   which   there   was   a  high   percentage   of   corporation 
property. 

Supplemental  to  the  sources  already  named,  California  has  sev- 
eral other  means  of  acquiring  revenue  for  State  purposes.  These 
are,  namely: 


TAXATION   IN   INDIANA  129 

(a)  An  annual  franchise  tax  of  1  per  cent  upon  all  corpora- 
tions other  than  those  already  mentioned  above.     The  actual  cash 
value  of  the  franchise  is  arrived  at  by  the  State  Board  of  Equaliza 
tion,  which  allows  proper  deduction  for  good  will.     These  fran- 
chises "include  the  actual  exercise  of  the  right  to  be  a  corporation 
and  do  business  in  the  State ;  also  the  right,  authority,  franchise,  or 
permission  to  maintain  wharves,  ferries,  toll  roads,  and  toll  bridges 
and  to  construct  and  maintain     ....     mains  for  conducting 
water,  oil,  or  other  substance. ' ' 

( b)  An  inheritance  tax,  the  first  $250,000  of  the  proceeds  of 
which  go  to  the  State  school  fund  and  any  excess  to  the  general 
fund. 

(c)  A  poll  tax  of  $2  is  levied  against  every  male  inhabitant  of 
the  State,  with  a  few  exceptions,  between  the  ages  of  21  and  60 
years. 

Besides  these  various  sources,  the  State  has  jealously  retained 
the  right  to  use  the  general  property  tax  for  State  revenue  when- 
ever in  exigencies  it  may  become  necessary.  In  such  instances  the 
State  Board  of  Equalization  has  the  authority  to  fix  the  rate.  Con- 
trol over  the  county  boards  of  equalization  and  the  making  of  all 
local  assessments  is  also  retained  by  the  State  and  vested  in  the 
State  Board  of  Equalization. 

Now  about  the  revenue  of  the  counties  and  municipalities. 
These  taxing  districts  levy  and  collect  taxes  upon  general  prop- 
erty, which  is  defined  to  include  "money,  credits,  bonds,  stocks, 
dues,  franchises,  and  all  other  matters  and  things,  real,  per- 
sonal, and  mixed,  capable  of  private  ownership."  The  usual  ex- 
emptions of  certain  classes  of  property  are  made  with  the  notable 
addition  of  real  estate  mortgages. 

Deeds  of  trust,  mortgages,  contracts,  or  other  obligations  by 
which  a  debt  is  secured  when  land  is  pledged  as  security  for  the 
payment  thereof,  together  with  the  money  represented  by  such 
debt,  are*  wholly  exempt  from  taxation. 

Mortgages  are  treated  as  interests  in  the  property  affected,  except  as 
to  railroads  and  other  quasi-public  corporations.  The  value  of  the  property 
less  the  value  of  the  security  is  taxed  to  the  owner  of  the  property ;  the 
value  of  the  security  to  the  owner  thereof;  both  in  the  county,  city,  or 
district  where  the  property  affected  thereby  is  located.  The  parties  may 
by  contract  provide  that  the  debtor  pay  the  whole  tax. 

The  personal  property  of  each  householder  is  also  made  exempt 
up  to  the  value  of  $100. 

9-2902 


130  INDIANA    UNIVERSITY 

• 

Poll  taxes  for  road  and  street  purposes  are  levied  by  the  local 
taxing  districts. 

The  counties,  by  their  boards  of  supervisors,  and  the  cities, 
by  their  legislative  bodies,  in  the  exercise  of  their  police  powers, 
may  license  every  kind  of  business  not  prohibited  by  statute.  As 
examples  of  these  licenses  levied,  theaters  pay  $200  to  $300  per 
quarter;  brokers  and  trust  companies  engaged  in  buying  and 
selling  notes,  stocks,  and  bullion,  $3  to  $100  per  quarter;  and 
pawnbrokers,  $30  per  quarter.  From  these  few  mentioned  it  may 
be  seen  that  licenses  constitute  no  mean  source  of  revenue,  which 
operates  of  course  to  reduce  the  amount  of  taxes  to  be  borne  by 
general  property. 

The  State  co-operates  with  the  counties  in  maintaining  the 
public  schools.  State  school  moneys  are  apportioned  to  the  various 
counties  on  the  basis  of  average  daily  attendance,  which  appears 
to  be  a  more  equitable  basis  than  that  employed  here  in  Indiana, 
that  is,  the  number  of  children  of  school  age  in  each  county,  without 
regard  to  the  actual  attendance. 

The  California  system  of  highways  adopted  in  1913  also  in- 
volves co-operation  between  the  State  and  the  counties.  The  State 
pays  one-third  of  the  construction  cost  and  one-half  of  the  main- 
tenance cost  of  principal  new  highways.  This  is  somewhat  similar 
to  the  plan  which  the  good  roads  enthusiasts  of  Indiana  are 
striving  for. 

Even  in  the  matter  of  administrative  detail  Indiana  may  profit 
in  a  review  of  the  system  of  the  Golden  State.  With  a  State 
Board  and  county  boards  of  equalization  quite  similar  to  our  tax 
boards  in  Indiana,  and  with  powers  practically  the  same,  the  task 
of  assessing  is  accomplished.  It  is  also  in  the  collection  of  the 
taxes  that  California  scores  over  our  Indiana  plan. 

There  the  county  assessors  collect  all  poll  taxes,  both  local  and 
state,  at  the  time  of  assessment,  much  in  the  same  manner  which 
the  local  assessors  of  Indiana  collect  dog  taxes.  For  the  collec- 
tion of  these  poll  taxes  the  county  assessors  are  paid  on  a  per- 
centage basis,  15  per  cent  of  gross  collections  being  allowed.  This 
plan  encourages  thorough  work  upon  the  part  of  the  assessors 
and  it  is  accomplished  without  the  expensive  and  burdensome 
detail  employed  in  this  State.  Our  plan  is  that  of  first  making 
the  assessment,  which  requires  the  filling  out  of  a  schedule,  the 
certification  of  this  to  the  county  auditor,  the  placing  of  an  account 
upon  the  tax-duplicate,  the  certification  of  this  to  the  county  treas- 
urer, and  the  collection  by  this  latter  officer,  or  the  attempted 


•    TAXATION    IN    INDIANA  131 

collection  by  him,  of  the  account  after  the  elapse  of  more  than  a 
year  from  the  date  of  original  assessment. 

By  giving  a  household  exemption  of  $100  and  collecting  the 
poll  taxes  at  the  time  of  assessment  as  done  in  California  the 
taxpayers  of  this  State  would  be  saved  many  thousands  of  dollars 
of  expensive  detail  and  the  total  revenue  would  not  be  reduced. 
This  statement  can  be  more  readily  accepted  when  it  is  known 
that  here,  where  no  exemption  whatever  of  household  goods  is 
allowed,  many  thousands  of  small  personal  assessments  are  placed 
upon  the  tax-duplicates,  the  taxes  levied  upon  which  accounts  do 
not  nearly  equal  the  cost  of  assessing  and  collection.  They  are  in 
reality  a  dead  loss. 

Another  valuable  administrative  detail  might  be  adopted  from 
the  California  plan,  which  would  eliminate  or  at  least  reduce  a 
loss  of  revenue  now  experienced  in  Indiana.  In  the  western  State, 
the  tax-lien  upon  all  property  assessed  attaches  upon  the  first 
Monday  of  March  of  each  year.  The  first  installment  of  taxes 
becomes  due  seven  months  later,  in  the  month  of  October  and 
delinquent  on  the  last  ctay  of  November.  The  remaining  install- 
ment becomes  payable  the  first  Monday  in  January  and  delin- 
quent the  last  Monday  in  April.  Here  in  Indiana  the  tax-lien 
attaches  the  first  day  of  March,  but  the  first  installment  of  taxes 
payable  thereon  does  not  become  due  until  the  following  Jan- 
uary and  delinquent  the  first  Monday  in  May.  The  second  in- 
stallment does  not  become  delinquent  until  the  first  Monday  of 
the  following  November,  which  is  more  than  a  year  and  a  half 
after  the  date  of  the  tax-lien.  The  elapse  of  this  greater  length 
of  time  is  the  cause  not  only  of  much  confusion  upon  the  part  of 
many  taxpayers,  but  it  results  in  an  actual  loss  of  revenue  from 
personal  property  assessments.  Many  transients  are  enabled  to 
avoid  the  payment  of  taxes  on  personalty.  Many  persons  who 
have  been  assessed  move  from  one  county  to  another,  many  more 
move  out  of  the  State,  and  many  are  removed  by  death. 

Thus  it  appears  that  several  leaks  in  our  system  might  be 
stopped  by  adopting  some  of  the  California  practices. 

These  details  of  administration  are  by  no  means  the  most  impor- 
tant plans  to  be  borrowed  from  California,  but  they  are  the  kind 
that  could  be  put  into  practice  in  Indiana  without  the  necessity 
of  constitutional  changes. 

If  the  California  system  were  now  in  operation  in  this  State 
the  people  of  Indiana  might  not  now  be  demanding,  as  they  are, 
a  radical  change  in  plan,  and  there  might  be  no  real  cause  for  this 
conference. 


132  INDIANA   UNIVERSITY 

SUMMARY  OF  THE  THIRD  SESSION 
JUDGE  JOHN  L.  RUPE,  Richmond 

The  duty  has  been  put  upon  me,  by  this  program,  to  summari/c 
the  papers  of  this  morning.  Before  I  came  into  this  room  I  met 
Ex-Governor  Durbin,  whom  many  of  you  know,  in  the  lobby  of 
the  hotel  and  he  said  to  me,  "John,  if  I  were  you,  if  I  were  in 
your  place  on  this  program,  I  would  suggest  to  the  Association 
that  they  might  profitably  pay  attention  to  the  other  end  of  the 
tax  proposition,  and  give  some  attention  to  the  outgo  and  not  so 
much  attention  to  the  in-come."  It  struck  me  as  being  a  very 
forcible  and  practical  suggestion. 

We  all  know  that  in  answering  the  question  of  taxation,  that 
is,  the  question  how  to  make  equal  the  raising  and  the  expenditure 
of  revenue  by  the  State  and  by  the  subdivisions  of  the  State,  the 
counties  and  municipalities,  it  matters  not  how  much  is  in  the 
treasury.  It  all  goes  out;  and  the  tendency  has  been  in  all  these 
years  not  to  reduce  but  to  increase  the  tax-rate.  So  that  my 
experience  and  observation  with  respect  to  this  question  has  been 
that  there  is  only  one  practical  way  of  limiting  extravagance  in 
expenditures,  and  that  is  to  limit  the  rate.  (Applause.) 

You  cannot  do  it  in  any  other  way.  There  must  be  some  limita- 
tion upon  all  of  the  different  corporations  that  are  given  the  power 
by  the  legislature  to  levy  taxes,  a  limitation  upon  their  power  in 
the  fixing  of  rates. 

The  papers  this  morning  have  been  of  the  highest  class,  and 
have  all  been  exceedingly  interesting.  It  seems  to  me  that  the 
person  undertaking  the  task  of  summarizing  these  papers  is  in 
danger  of  detracting  somewhat  from  the  power  and  force  with 
which  the  speakers  of  the  morning  presented  them. 

There  are  several  lessons  which  seem  to  me  to  stand  out  promi- 
nently, and  which  are  practical,  that  we  may  take  from  these 
excellent  papers  of  the  morning.  When  I  looked  at  this  program 
for  the  various  sessions  of  this  conference  of  the  Association  it 
seemed  to  me  that  the  best  part,  in  a  practical  way,  of  this  Asso- 
ciation's labors  at  this  meeting  would  be  this  morning's  session, 
because  after  all  we  must  find  out  and  know  the  practical  assess- 
ment and  taxation  of  property  by  the  experience  of  other  States. 
I  am  proud  to  have  lived  in  Indiana  all  my  life;  I  am  a  native 
Hoosier,  and  there  is  no  one  in  this  State  who  is  prouder  of 
Indiana  than  I  am;  but  we  are  in  this  position  with  respect  to 
our  system  of  assessment  and  taxation  of  property:  there  is  not 


TAXATION   IN   INDIANA  133 

any  possible  change  that  we  could  make  which  would  not  better 
present  conditions.  Think  of  it,  men  of  Indiana.  Our  constitu- 
tion, under  which  we  are  operating  now,  was  adopted  sixty-two 
years  ago.  )Those  of  us  who  have  lived  that  long,  whose  memories 
run  back  that  long,  and  who  realize  what  changes  have  taken  place 
in  this  great  State  of  Indiana  during  that  period  of  sixty-two 
years,  can  appreciate  what  it  means  to  be  working  under  a  system 
that  was  adopted  in  Indiana  sixty-two  years  ago. 

Why,  then  this  community  of  Indiana  was  an  agricultural 
State.  We  had  no  large  cities  and  towns  in  1852,  comparatively 
speaking,  and  comparatively  speaking  we  had  no  railroads,  tele-- 
graph  lines,  interurbans,  manufacturing  interests.  Nothing,  com- 
paratively speaking,  that  we  have  today.  Why,  in  sixty-two  years 
Indiana  has  grown  from  an  agricultural  community  to  one  of  the 
great  States  in  this  great  country,  in  manufacturing,  in  com- 
merce, in  railroads,  and  in  every  line  of  human  endeavor;  so  that 
now  our  constitution  is  not  adapted  at  all  to  our  present  conditions. 

Now  what  stands  out  prominently  in  the  lessons  Which  we 
ought  to  learn  from  these  papers  of  the  morning?  One  of  the 
•lessons  is  that  there  has  been  no  change  from  the  old  antiquated 
system  of  general  property  tax  that  has  not  proved  to  be  an 
improvement.  And  there  is  no  system  that  has  been  adopted  and 
carried  forward  in  any  of  our  sister  States  that  has  proved  suc- 
cessful except  as  it  has  been  a  system  which  has  allowed  the  classi- 
fication of  property  for  the  purposes  of  assessment  and  taxation. 
There  is  a  fundamental  rule  which  was  quoted  by  one  of  the 
speakers  this  morning  which  we  never  can  get  away  from  in  any 
system  of  taxation  that  may  be  adopted  anywhere.  No  system 
can  be  successful  that  permits  a  rate  of  taxation  against  any  par- 
ticular class  of  property  which  is  beyond  the  rate  which  that  class 
of  property  can  reasonably  and  justly  bear. 

Now  in  Minnesota  they  have  practically  abandoned  the  theory 
under  which  we  are  working,  namely,  that  every  class  of  property 
must  be  assessed  at  its  full  cash  value  at  the  same  rate.  In  the  ad- 
ministration of  that  law  we  all  know  that  there  is  not  anything 
approaching  justice  or  equality. 

And  we  hear  always,  when  the  question  of  taxation  comes  up, 
about  the  citizen  who  dodges  his  taxes,  who  does  not  give  in  his 
property.  There  is  another  fundamental  rule  which  must  govern 
in  every  perfect  system,  or  every  system  that  approaches  perfec- 
tion in  the  assessment  of  property,  namely,  that  no  rate  can  ever  be 
successful  which  is  beyond  what  can  be  reasonably  collected.  In 


134  INDIANA    UNIVERSITY 

its  practical  operation  that  rule  applies  with  particular  force  to  in- 
tangible property,  because  that  is  the  kind  of  property  the  citizen 
can  withhold  and  secrete.  Whenever  you  put  a  rate  upon  that  kind 
of  property  that  the  citizen  realizes  is  unjust,  and  is  practically  a 
confiscation  of  his  property,  there  is  only  one  result — the  property 
will  not  appear  upon  the  tax-duplicate. 

I  want  to  say  for  the  people  of  Indiana  that  they  are  as  patri- 
otic and  as  honest  as  the  people  of  Minnesota,  or  Ohio,  or  AVisconsin, 
or  any  other  State  in  this  Union ;  and  I  want  you  to  recall  to  your 
minds  what  these  people  in  these  different  States  have  done,  as 
was  developed  by  the  papers  this  morning.  They,  realizing  the 
conditions  under  which  we  are  plodding  along  in  Indiana  now,  have 
got  away  from  them,  so  that  their  people  can  be  honest,  and  the 
people  have  responded.  The  people  of  Minnesota  responded  to  a 
just  system;  the  people  in  Wisconsin  responded  to  a  just  system; 
with  the  result  that  the  revenue  which  was  necessary  for  their 
government  was  provided,  and  at  the  same  time  their  people  rea- 
lized that  they  were  being  dealt  with  justly. 

Now  there  is  one  other  thing — and  I  am  not  going  to  take  much 
time  in  summarizing,  because  these  papers  speak  for  themselves.* 
Nothing  is  needed  to  impress  upon  the  minds  of  the  intelligent  citi- 
zens of  Indiana  the  lessons  which  the  experiences  of  these  progres- 
sive States  have  given  us,  and  by  which  we  ought  to  profit.  But 
there  is  one  other  thing"  that  I  want  to  speak  about.  Every  one  of 
these  States  which  has  progressed,  has  abandoned  an  old  theory 
upon  which  we  are  working  and  plodding  along.  They  have 
adopted  a  different  system  in  the  selection  of  the  assessor.  It 
makes  no  difference,  men  of  Indiana,  what  system  you  have,  unless 
it  is  intelligently  administered  by  men  who  know  how  to  adminis- 
ter the  law  properly.  Unless  it  is  so  administered  it  never  can  be 
and  never  will  be  successful.  (Applause.) 

Now  in  Indiana  we  have  been  plodding  along,  affecting  to  be- 
lieve and  to  think  that  the  centralizing  of  power  in  the  State  is 
wrong;  that  we  ought  to  have  home  government;  that  we  ought  to 
bring  our  government  down  to  the  people  in  the  townships,  and 
elect  the  township  assessor.  And  whom  do  we  elect?  Why,  some 
fellow  gets  it  into  his  head  that  he  wants  a  job  at  two  dollars  a  day, 
and  he  is  a  candidate,  and  some  other  fellow  of  about  the  same  size 
is  a  candidate  too,  and  we  simply  have  the  choice  of  voting  for  one 
of  two  or  three  fellows,  neither  one  of  whom  ever  ought  to  be 
thought  of  for  the  position  of  assessor.  There  is  the  foundation  of 
the  trouble,  because  there  is  where  the  matter  starts.  Unless  you 


TAXATION    IN    INDIANA  135 

have  intelligence  in  the  assessor  who  comes  in  contact  with  the 
people,  unless  you  have  a  man  who  knows  how  to  perform  his  duty, 
it  matters  not  what  kind  of  a  system  you  have ;  it  never  will  be  just 
and  it  never  will  be  effective. 

Can  we  not  do  something  now?  We  have  meetings  of  this  kind, 
and  they  are  very  instructive,  but  at  last  we  have  to  come  to  the 
point  of  doing  something,  of  taking  some  practical  forward  step. 
We  cannot  do  what  we  ought  to  do  in  Indiana  until  we  get  rid  of 
the  old  antiquated  provision  of  our  present  constitution.  (Ap- 
plause.) 

I  was  handed  a  few  minutes  ago  an  amendment  to  our  constitu- 
tion. The  people  of  Indiana  are  ready  for  this,  I  believe.  You 
talk  about  educating  the  people.  Why,  the  commercial  clubs  of  In- 
diana have  been  discussing  this  matter  for  the  last  two  years.  They 
are  interested  in  it,  and  they  are  educating  the  people,  and  the  time 
is  ripe  now  to  have  an  amendment  to  our  constitution,  a  simple 
amendment  to  leave  it  in  the  power  of  the  legislature,  from  time  to 
time,  as  experience  may  demonstrate  is  right  and  best,  to  devise  and 
put  in  operation  a  system  which  shall  secure  justice  and  equality 
in  the  burdens  which  are  cast  upon  the  people  in  the  way  of 
taxation. 

We  have  had  a  State  Tax  Commission  in  this  State  for  some 
years,  and  what  has  it  done?  Why,  it  has  done  the  best  it  could, 
but  it  has  not  had  power  to  do  anything  except  to  suggest.  There 
ought  to  be  power  invested  in  the  State  Board  of  Tax  Commission- 
ers to  see  to  it  that  the  assessments  are  made  just  and  right  and 
equal  on  property  throughout  the  State ;  and  it  ought  to  be  invested 
with  power,  when  it  finds  that  that  is  not  done,  to  have  the  assess- 
ment made  under  its  supervision  and  direction.  A  State  Tax  Com- 
mission is  a  mere  figurehead  unless  it  has  some  power  to  put  in 
operation  its  ideas  and  suggestions.  That  was  the  very  founda- 
tion purpose  for  which  the  State  Tax  Commission  was  organized ; 
but  it  can  only  assess  railroad  property  and  suggest  things.  Now, 
some  gentlemen  might  say  to  me  that  it  has  power  to  say  that  real 
estate  shall  be  assessed  so  and  so ;  that  personal  property  of  a  par- 
ticular kind  shall  be  assessed  so  and  so.  I  am  told  that  last  year 
the  State  Tax  Commission  authorized  the  assessors  to  assess  mort- 
gages at  seventy-five  per  cent.  Well,  it  seemed  to  me  that  if  it  had 
power  to  say  that  they  should  be  assessed  on  a  seventy-five  per  cent 
basis  it  would  have  power  to  say  that  they  should  be  assessed  on  a 
sixty-five  per  cent  basis  or  a  sixty  per  cent  basis. 

The  effect  of  the  assessment  of  mortgages  and  investments  of 


136  INDIANA    UNIVERSITY 

that  kind  under  our  system  is  to  drive  capital  out  of  every  com- 
munity ;  and  it  is  not  because  the  people  that  have  the  capital,  that 
have  the  money,  want  to  evade  taxation  under  any  system  that  is 
fair  and  just;  but  you  cannot  borrow  money  in  Richmond,  where 
I  live,  and  you  cannot  borrow  money  in  Indianapolis,  or  in  Craw- 
fordsville,  or  Bloomington,  or  anywhere  in  Indiana  from  a  private 
individual  upon  a  mortgage.  You  simply  cannot  do  it.  If  a  man 
with  money  has  a  thousand  dollars  to  invest  you  cannot  borrow  it 
on  a  mortgage,  because  he  must  pay  practically  four-fifths  of  the 
income  that  he  gets  from  it  in  taxes ;  and  there  must  be  relief  from 
that  condition  before  we  can  have  that  kind  of  business  prosperity 
in  our  communities  that  citizens  of  Indiana  ought  to  have  and  are 
entitled  to.  The  borrower  cannot  get  the  money  simply  because  the 
individual  who  would  lend  him  the  money  cannot  afford  to  lend  it  to 
him.  If  he  cannot  get  it  from  a  bank  or  a  trust  company  he  must  go 
outside — somewhere  else — and  then  the  money  that  is  here  for  in- 
vestment is  put  into  our  glorious  three-mile  gravel  road  bonds,  or 
something  that  is  not  taxable,  and  is  taken  out  of  the  ordinary  chan- 
nels of  business  in  the  community  that  is  entitled  to  it,  where  it 
ought  to  be,  and  where  it  would  do  the  most  good. 

Now  I  say  that  I  believe  the  time  has  come  when  we  ought,  in 
some  organized  way,  to  do  something.  We  can  enlist  the  active 
cooperation  of  every  commercial  and  business  club  in  Indiana — 
and  we  can  do  it  now — to  take  some  forward  step  to  get  rid  of  this 
incubus  which  we  have  upon  us  in  our  unfair  and  unjust  system 
of  taxation  in  Indiana. 


V.    THE  REMEDY  IN  INDIANA 


WHAT  IS  WRONG,  SYSTEM  OR  ADMINISTRATION? 
DAN  M.  LINK,  State  Tax  Commissioner 

I  think  it  is  important  today,  before  discussing  this  subject,  to 
correct  what  may  be  a  misapprehension  in  the  minds  of  those 
present  regarding  the  attitude  of  the  State  Tax  Board  toward  the 
assessment  of  mortgages  and  credits,  referred  to  by  Judge  Rupe. 

I  think  that  you  might  infer  from  the  statement  by  Judge  Rupe 
that  the  State  Tax  Board  had  assumed  the  power  to  authorize  local 
assessors  to  assess  property  at  less  than  its  true  cash  value.  Now 
that  is  not  the  case.  The  State  Tax  Board  is  a  reviewing  or  equal- 
izing body,  like  the  board  of  review  of  a  county.  It  performs  two 
great  functions.  One  is  to  assess  such  property  as  comes  within  its 
original  jurisdiction.  The  other  is  to  equalize  all  property  assessed 
be  assessing  officers  over  which  it  has  jurisdiction.  Last  year  it 
appeared  to  the  State  Tax  Board,  as  has  been  mentioned  here  by 
every  speaker  at  this  meeting,  that  the  situation  whereby  real  estate, 
assessed  three  years,  was  upon  the  assessment  list  at  fifty  or  sixty 
or  seventy  per  cent  of  its  true  cash  value,  while  intangible  property 
as  well  as  tangible  personal  property  was  being  assessed  at  its  true 
cash  value,  or  one  hundred  per  cent,  was  a  very  great  temptation 
to  sequestration  of  property,  and  was  a  very  great  wrong  upon  the 
owner  of  the  property  taxed  at  one  hundred  per  cent  of  its  full 
value.  The  Tax  Board,  therefore,  exercised  the  power  involved  in 
the  function  of  equalization  by  saying  to  boards  of  review  and 
other  assessing  bodies  and  officers  that  while  all  property  should  be 
assessed  at  one  hundred  cents  on  the  dollar,  as  commanded  by  the 
statute,  upon  the  equalization  of  such  property  there  should  be  an 
attempt  made  to  place  it  all  upon  the  tax-duplicate  at  somewhere 
near  an  equal  percentage  of  true  cash  value;  that  real  estate,  as 
we  all  knew,  was  not  assessed  at  its  true  cash  value  and  could  not 
be  reassessed  until.  1915,  and  therefore  it  was  our  belief  and  judg- 
ment that  the  valuation  of  moneys,  credits,  and  all  other  forms  of 
personal  property,  tangible  or  intangible,  should  be  equalized  by 
deducting  from  the  true  cash  value  the  sum  of  twenty-five  per  cent. 

Now  the  people  responded  to  that  sort  of  fair  treatment  in  just 

as?) 


138  INDIANA    UNIVERSITY 

the  way  that  you  might  readily  expeet,  in  the  way  that  the  speakers 
told  us  they  responded  in  Minnesota,  in  New  York,  and  other  States 
where  they  have  a  classified  tax ;  that  is  to  say,  that,  notwithstand- 
ing the  fact  that  there  was  an  authorized  deduction  all  over  the 
State  of  Indiana  of  twenty -five  per  cent  upon  all  personal  property, 
tangible  and  intangible,  the  returns  on  personal  property  in  that 
year  increased  forty-three  millions  of  dollars. 

Now  this  subject  that  has  been  assigned  to  me,  "What  is  Wrong, 
System  or  Administration  ? "  is  a  very  unfortunate  phrasing  of  the 
subject,  because  the  phrasing  itself  assumes  that  one  is  wrong,  and 
that  the  other  is  correct,  or  that  one  or  the  other  is  responsible  for 
the  situation  we  have  in  the  State  of  Indiana,  and  which  we  are 
now  criticizing.  And  it  does  not  cover  the  ground.  I  think  if  we 
had  the  subject  read  something  like  this,  ''What  is  wrong  in  In- 
diana?" or  "What  is  wrong?"  it^would  be  broad  enough,  so  that 
one  might  properly  discuss  the  subject  from  every  point  and  every 
angle,  as  it  deserves. 

Now,  I  am  not  an  expert  on  taxation.  I  am  a  student,  as  most 
of  you  are  who  are  here,  but  I  do  not  believe  that  either  system  or 
administration,  either  singly  or  together,  is  or  are  responsible  for 
all  the  criticism  and  unrest  that  we  find  in  the  State  of  Indiana  in 
regard  to  our  taxing  system.  The  truth  about  it  is  that  these  var- 
ious inequalities  in  the  assessment  of  property  are  due  very  largely 
to  the  fact  that  taxes  have  been  increasing  in  amount — I  mean  in 
aggregate  amount ;  that  from  year  to  year  the  State  of  Indiana  and 
its  various  taxing  subdivisions  have  been  taking  over  new  functions, 
broadening  the  scope  of  the  work  of  the  government  and  its  sub- 
divisions; and  that  each  additional  function  taken  over  from  the 
people,  thus  relieving  individuals  and  society  from  performing  that 
duty  for  themselves  and  at  their  own  expense,  means  that  there 
must  be  a  tax  levied,  or  an  increase  in  the  tax  levied  sufficient  in 
amount  to  pay  for  the  service  rendered  by  the  government. 

Now,  taxes  have  been  increasing  by  leaps  and  bounds,  because 
society  in  the  State  of  Indiana,  and  in  the  United  States  generally, 
has  been  organizing  and  developing  with  wonderful  rapidity  in  the 
last  quarter  of  a  century,  and  the  result  is  that  taxes  have  been 
going  up,  just  as  the  functions  of  government  have  been  increasing, 
just  as  the  demands  upon  government  by  society  for  improvements, 
and  in  various  lines  of  endeavor,  have  been  increasing. 

For  instance,  last  year  in  the  State  of  Indiana,  the  general  prop- 
erty tax  produced  $44,223,718.  Of  every  dollar  of  that  amount 
that  was  paid  in  the  State  of  Indiana,  on  the  average  thirty-one 


TAXATION    IN    INDIANA  139 

cents  and  four  mills  was  for  educational  purposes ;  seventeen  cents 
and  eight  mills  was  for  good  roads ;  so  that  the  State  of  Indiana  in 
1913  took  from  the  people  $44,233,000,  and  of  that  amount  practi- 
cally $22,000,000  was  spent  upon  two  of  our  hobbies,  good  roads  and 
good  schools. 

Now  people  are  inclined,  when  they  talk  about  taxes,  to  con- 
fuse taxes  or  revenue  in  its  various  phases.  They  think  that  the 
amount  of  tax  they  pay  may  be  reduced  by  some  sort  of  a  change  in 
the  system,  and  that  is  the  most  difficult  thing  that  this  conference 
and  the  Tax  Association  has  to  deal  with — the  matter  of  educating 
the  people  of  the  State  of  Indiana  up  to  the  point  where,  if  they  de- 
sire the  State  and  its  subdivisions  to  take  from  them  a  less  aggregate 
amount  of  money,  they  must  first  practice  economy,  as  was  said  by 
Governor  Ralston  and  by  Judge  Rupe.  This  economy  must  begin 
at  the  foundation,  because  so  long  as  these  demands  are  made  by  the 
taxpayers  of  the  State  upon  the  State  and  its  subdivisions  for  the 
performance  of  these  functions',  the  amount  of  taxes  cannot  appre- 
ciably grow  less. 

Now,  the  people  are  inclined  to  regard  the  tax  levy  as  being  the 
cause  of  high  taxes.  That  is  to  say,  they  are  unable  to  distinguish 
between  cause  and  effect.  A  tax  levy  is  an  effect  and  not  a  cause. 
The  townships  and  the  counties  and  the  State  make  budgets,  and 
then  they  adjust  the  levy  to  produce  sufficient  funds  to  cover  that 
budget.  The  people  of  the  township,  city,  town,  and  county  should 
understand  that  when  their  budget  boards — that  is  to  say,  the  ad- 
visory board  of  the  township,  and  the  county  council  of  the  county 
— get  together  and  fix  upon  the  appropriations  for  the  coming  year, 
they  are  to  that  extent  fixing  the  tax  levy  because  a  sufficient 
amount  must  be  levied  to  cover  the  appropriation  for  the  coming 
year.  The  budget  is  the  cause ;  the  levy  is  merely  the  effect.  And 
until  we  can  introduce  economy,  first  in  the  operation  of  the  vari- 
ous governmental  agencies  of  the  State,  and  secondly  in  our  desire 
for  various  new  functions  and  increased  duties  imposed  upon  the 
State  and  its  subdivisions,  the  aggregate  amount  of  taxes  that  will 
be  extracted  from  the  taxpayers  of  the  State  of  Indiana  will  not 
and  cannot  grow  less. 

What  are  the  requisites  of  a  taxing  system? 

First,  while  the  experiences  of  the  State  of  New  York  and  the 
State  of  Pennsylvania  and  the  State  of  Minnesota  and  the  State 
of  California,  and  of  Prussia  and  Australia,  and  of  the  western 
provinces  of  Canada,  are  instructive,  so  far  as  general  principles 
go,  it  is  an  axiom  in  political  economy,  at  least  so  far  as  the  science 


140  INDIANA    UNIVERSITY 

of  taxation  is  concerned,  that  every  taxing  system  must  be  adjusted 
to  the  economical  conditions  of  the  state  in  which  it  is  used.  So 
that  in  considering  what  we  ought  to  regard-  in  this  State  as  an 
approximately  ideal  system  of  taxation  we  must  first  of  all  take 
a  census,  or  a  survey  of  the  economic  conditions  in  the  State  of 
Indiana,  and  adjust  whatever  taxing  system  we  may  adopt  to  such 
conditions. 

Second,  we  must  have  a  taxing  system  which  will  produce 
equity,  that  is,  an  equality  of  assessments. 

And  third,  but  not  the  least  by  any  means,  we  must  have  a 
system  that  is  in  itself  economical.  Now,  I  have  heard  speakers 
here  discuss  taxing  systems  whereby  all  the  incidents  of  ever- 
shifting  taxation  may  be  followed  in  their  most  minute  details; 
whereby  you  are  able  to  fix,  by  scientific  investigation,  the  par- 
ticular dollar  that  ought  to  be  put  into  the  public  treasury,  be- 
cause it  is  due  to  the  State;  and  whereby  there  are  sufficient 
machinery  and  officers  to  chase  that  dollar  down  and  follow  it  into 
the  pocket  of  the  man  who  ought  to  pay  it.  One  of  the  troubles 
about  taxation  is  this,  that  the  machinery  of  taxation  must  be 
in  itself  economical.  In  other  words,  you  cannot  extract  two  dol- 
lars from  the  taxpayer,  one  dollar  to  pay  government  expenses 
and  the  other  dollar  to  pay  the  mar  who  collects  the  tax.  The 
machinery  must  be  reasonably  economical.  It  must  be  no  more 
than  is  absolutely  necessary  for  the  operation  of  a  successful, 
equitable,  and  practicable  system. 

And  fourth,  it  must  be  practicable.  That  is,  it  must  be  work- 
able. And  here  again  theory,  and  fact  or  experience,  meet  in 
irreconcilable  conflict.  I  will  concede  the  truth  that  one  who  is 
deeply  enough  versed  in  economics  might  sit  down  and  draft  a 
system  of  taxation  that  would  be  just  and  equitable,  but  it  would 
not  work  fifteen  minutes.  There  is  no  sort  of  machinery  that  has 
yet  been  devised  that  would  make  it  work  in  actual  practice.  So 
that  the  system  must  be  such  as  will  actually  work,  because  a 
system  of  taxation  that  is  only  good  to  look  at  does  not  produce 
any  revenue.  The  State  lives  upon  its  revenue ;  and  if  the  system 
is  one  that  will  not  work  under  the  machinery  that  is  devised  for 
it,  to  that  extent  the  State,  you  know,  is  just  simply  put  out  of 
business. 

Fifth,  it  must  possess  another  quality,  and  neighboring  States 
have  had  a  sad  experience  in  that  respect — overlooking  it — it  must 
not  be  odious,  vexatious,  or  oppressive. 

Now,  we  talk  about  intangible  property.     States  have  tried  all 


TAXATION   IN   INDIANA  141 

kinds  of  ways  to  put  all  sorts  of  intangible  property  upon  the 
tax-list.  They  have  done  that  by  tax  inquisitors,  and  by  various 
sorts  of  officers,  and  tax  detectors;  but  there  is  something  about 
the  American  citizen  that  causes  him  to  rebel  against  any  sort 
of  tax  investigation  that  partakes  of  inquisition,  however  just  and 
however  right  it  may  be  that  the  man  who  owns  intangible  prop- 
erty and  sequestrates  it  ought  to  be  hunted  down  and  be  made  to 
put  it  upon  the  tax-list.  The  ordinary  American  citizen  will  not 
stand  for  it,  and  he  has  sufficient  influence  in  the  community  in 
which  he  lives  so  that  his  neighbors  will  help  him  abolish  a  law  of 
that  kind.  So  that  your  tax  system  must  not  bo  odious,  it  must 
not  be  vexatious,  and  it  must  not  be  oppressive. 

Of  course,  all  income  enjoyed  by  anybody  is  derived  from 
interest,  rents,  profits,  and  wages.  I  believe  that  is  scientifically 
correct.  So  that  the  goal  of  all  these  economic  experts  is  to 
devise  some  system  whereby  there  will  be  taken  from  a  man's 
income  an  amount  sufficient  to  operate  the  government,  and  yet 
an  amount  in  just  proportion  to  that  paid  by  every  other  man, 
considering  the  source  from  which  the  income  is  derived,  whether 
it  be  from  wages,  profits,  interest,  or  rents.  That  is  to  say,  the 
man  who  has  a  mortgage,  or  a  note  secured  by  a  mortgage  upon 
real  estate,  upon  which  he  gets  six  per  cent  interest,  ought  not 
to  be  compelled  to  pay  fifty  or  seventy-five  per  cent  of  that  income 
in  taxes.  You  are  taxing  there  the  income  at  a  greater  rate  than 
capital  will  bear,  and  consequently  there  ought  to  be  some  adjust- 
ment upon  these  various  phases  of  wealth,  or  rather  property, 
so  that  each  one  will  be  taxed  in  proportion  to  the  amount  which 
he  is  able  to  extract  from  the  wealth  which  he  has. 

We  do  not  tax  wealth  as  wealth.  We  tax  property,  and  we 
tax  intangibles  like  mortgages  and  things  of  that  kind  which  are 
not  wealth  in  themselves,  but  simply  the  representatives  of  wealth. 
I  think  that  economists  generally  agree  that  the  system  of  taxation 
should  be  based  upon  the  ability  to  pay.  We  have  in  our  consti- 
tution undertaken  to  say  that  the  ability  to  pay  is  represented  by 
capital.  That  is  to  say,  that  the  ability  to  pay  is  represented  by 
the  amount  that  a  man  has,  and  not  the  amount  of  interest,  rent, 
profits,  or  wages  which  he  derives  from  the  capital  account.  That, 
all  economists  agree,  is  wrong,  and  that  is  the  cause  of  the  inequality 
and  dissatisfaction  which  exist  in  the  States  where  there  is  a  gen- 
eral property  tax. 

Now  the  question  arises,  there  being  a  general  agreement  that 
there  should  be  some  sort  of  modification  or  reform  in  this  system 


142  INDIANA    UNIVERSITY 

in  the  State  of  Indiana,  What  is  there  in  our  system  that  we  ought 
to  remedy,  and  what  sort  of  a  remedy  have  we  to  offer  for  it? 

In  the  first  place,  the  defects  that  we  have  are  what  the  doctors 
call  congenital,  that  is,  we  were  born  with  them — at  least  when 
the  State  was  re-created  by  this  new  constitution  sixty-two  years 
ago,  as  described  by  Judge  Rupe — and  we  cannot  get  rid  of  them 
unless  we  are  regenerated.  We  must  have  a  new  constitution 
before  the  basic  or  fundamental  features  of  our  taxing  system  can 
be  changed.  It  is  not  of  any  use  for  me  to  discuss  the  question 
here  as  to  what  sort  of  changes  may  or  ought  to  be  made  at  this 
time.  I  think  it  is  generally  agreed  that  the  taxing  clause  of 
the  constitution  ought  to  be  something  in  the  form  of  the  amend- 
ment that  has  been  proposed  by  Senator  Stotsenburg,  giving  the 
legislature  authority  to  classify  property,  and  to  make  the  imposi- 
tion of  taxes  upon  the  owners  of  various  kinds  of  property  some- 
what equal  to  their  ability  to  pay  as  represented  by  their  income 
from  that  property.  In  addition  to  that,  we  ought  to  have  an 
income  tax  whereby  we  can  reach  certain  classes  of  tangibles  and 
intangibles  that  we  do  not  reach  now  at  all,  and  which  cannot  be 
reached  by  any  other  system.  In  other  words,  we  have  a  man  in 
Indianapolis  who  has  an  income  from  his  profession  of  over  ten 
thousand  dollars  a  year,  and  he  spends  it.  He  does  not  pay  a 
dollar  of  tax,  because  there  is  no  way  that  we  can  get  that  sort 
of  income  upon  the  tax-duplicate;  but  he  enjoys  the  benefits  of 
society  and  the  protection  of  the  government  without  paying  any 
tax  whatever. 

In  many  of  the  other  States  they  are  going  very  largely  towards 
the  occupation  or  business  tax,  or  franchise  tax,  license  fees  of 
various  kinds,  and  that  is  so  in  a  number  of  States  where  they 
undertake  to  separate  the  State  and  local  taxes,  as  in  California 
and  Ohio.  In  Ohio  the  general  tax  levy  there  is  a  fraction  of  one 
mill,  and  they  have  been  taking  over  as  revenues  belonging  to 
the  State  certain  franchise  taxes,  corporation  taxes,  and  license 
fees,  and  thus  have  been  able  to  separate  the  State  revenues  from 
the  local  revenues,  to  a  certain  extent,  and  to  a  very  large  extent 
get  away  from  this  feeling  of  jealousy  that  exists  in  the  Stntc 
of  Indiana  between  the  State  and  the  various  counties,  and  the 
feeling  between  this  county  and  that  county,  that  one  county  is 
being  under-assessed  or  over-assessed  in  comparison  with  another 
county  which  causes,  I  am  sure,  the  State  Tax  Board  most  of  its 
trouble. 

I  am  coming  last  to  what  seems  to  me  at  the  present  moment 


TAXATION    IN    INDIANA  143 

to  be  the  important  feature,  the  important  remedy  to  be  offered 
by  this  conference,  and  that  is  in  the  administrative  features  of 
our  taxing  system.  I  cannot  state  it  any  better  than  Judge  Rupe 
stated  it  here.  He  said  all  that  I  could  say,  and  he  said  it  a 
great  deal  better  than  I  could  say  it.  It  is  axiomatic  that  no 
taxing  system  can  be  made  to  operate  automatically.  You  must 
have  machinery  sufficient  to  operate  it.  There  must  be  a  guiding 
hand,  or  centralization  of  authority.  The  temptation  to  assessors 
to  favor  their  constituents,  their  neighbors,  and  their  friends  must 
be  removed.  The  temptation  of  the  township  assessor  to  under- 
assess  the  property  of  his  constituents  as  against  that  of  the  con- 
stituents of  the  assessor  in  adjoining  townships  must  be  removed, 
and  the  temptation  of  the  county  board  of  review  and  the  county 
assessor  to  get  the  better  of  surrounding  counties  must  be  removed. 
But,  as  Judge  Rupe  said,  the  State  Tax  Board  can  do  nothing 
more  under  present  conditions  than  sit  back  and  scold. 

I  want  to  pay  a  tribute  to  the  assessors,  both  county  and  town- 
ship, of  the  State  of  Indiana.  In  the  four  years  that  I  have  been 
laboring  with  them  for  the  purpose  of  bettering  the  assessment 
of  property  in  this  State,  I  have  found  the  vast  majority  of  them 
to  be  clean,  conscientious,  and  thoroughly  able  men.  But  we  do 
find  a  few,  a  small  percentage,  that  are  dishonest,  that  are  ineffi- 
cient, that  show  favoritism;  they  are  the  ones  who  disorganize  the 
machinery  of  the  entire  State.  If  you  have  one  township  asses- 
sor of  that  kind  in  the  county,  if  you  have  a  few  county  assessors 
in  the  State  who  are  of  that  disposition,  it  is  utterly  impossible 
for  the  State  of  Indiana  to  have  equality  of  assessment  over  the 
entire  State.  At  the  next  session  of  the  legislature,  there  ought 
to  be  such  legislation  as  will  enable  equality  of  assessment  to  be 
enforced  with  the  initial  assessment ;  and  there  should  be  some 
sort  of  a  law  passed  that  would  give  somebody  coercive  authority 
over  the  initial  assessor  as  well  as  over  the  initial  assessment. 
The  theory  of  the  law  has  been  that  a  man  who  is  over-assessed 
may  appeal  and  the  initial  assessments  can  be  corrected  by  the 
board  of  review,  and  that  the  action  of  the  board  of  review  can 
be  supervised  by  the  State  Tax  Board.  But  there  must  be  some- 
body somewhere  with  power,  coercive  in  character,  over  the  initial 
assessor  himself;  because  the  man  who  is  under-assessed  does  not 
appeal  and  the  under-assessments  are  not  corrected.  It  is  only 
those  who  are  over-assessed  that  take  an  appeal. 

I  am  sure  that  with  the  change  in  the  administrative  features 
that  I  have  outlined  here,  we  shall  be  in  a  better  position;  and 


144  INDIANA   UNIVERSITY 

with  the  constitutional  amendment  which,  in  the  temper  and 
condition  of  the  public  mind  in  the  State  of  Indiana  today,  I 
believe  will  pass,  we  shall  be  able  to  work  out  a  system  of  taxation 
which,  while  it  may  not  be  entirely  just — because  that  is  an  impos- 
sibility —will  approximate  equality  and  fairness;  and  "when  we 
have  arrived  at  that  we  have  done  all  any  person  or  any  set  of 
persons  or  any  State  has  been  able  to  do  in  the  history  of  taxation. 

THE  BUDGET  SYSTEM 
JOHN  A.  LAPP,  Director  Indiana  Bureau  of  Legislative  Information 

The  growth  of  public  expenditures,  federal,  State,  and  local, 
has  come  to  be  a  matter  of  serious  concern.  We  spend  three 
billion  dollars  annually  without  adequate  financial  planning.  Each 
annual  or  biennial  appropriation  in  nation,  State,  and  city  shows 
increases,  and  the  burden  upon  the  people  in  the  form  of  direct 
and  indirect  taxes  has  caused  them  to  think  seriously  on  the 
question,  What  are  we  getting  for  our  money  in  public  affairs? 
Political  campaigns  are  waged  upon  the  issue  of  economy  in 
government,  the  "Outs"  always  charging  the  "Ins"  with  extrava- 
gance, but  immediately  when  the  "Outs"  become  the  "Ins,"  the 
process  of  increasing  expenditures  continues.  That  this  process 
will  continue  no  one  can  doubt  who  studies  the  tendencies  of 
political  society. 

As  a  matter  of  fact  few  political  campaigns  waged  on  the 
issue  of  economy  are  conducted  with  an  intelligent  appreciation 
of  the  actual  facts  of  the  case,  simply  for  the  reason  that  the 
facts  may  not  be  readily  found  from  financial  statements.  The 
financial  departments  of  our  governments  have  been  run  with 
little  plan  or  purpose.  Appropriations  have  been  made  by  an 
un guided  legislative  body,  each  department  securing  whatever  the 
personal  influence  of  its  chief  could  secure.  Little  attention  has 
been  paid  to  the  fitting  of  expenses  to  revenues  and  the  clarifying 
of  the  financial  statements  in  such  a  way  that  the  taxpayer  may 
understand  where  his  money  comes  from  and  where  it  goes.  The 
natural  attitude  engendered  by  this  system  is  one  of  suspicion  of 
the  party  in  power  and  antagonism  to  its  purposes. 

Corporate  business  is  run  upon  a  budget  carefully  prepared 
from  known  facts  of  the  business.  A  close  estimate  of  revenues 
is  made,  and  the  expenditures  are  kept  within  the  limits  fixed  by 
income.  If  the  income  is  available,  the  business  is  expanded  along 
carefully  planned  lines,  but  if  the  income  is  not  available  new 


TAXATION  IN  INDIANA  145 

expansions  are  curtailed.  By  this  system  of  introspection  every 
part  of  the  business  is  scrutinized,  and  the  efficient  activities  of 
the  concern  are  promoted  while  those  which  offer  less  advantage 
are  curtailed  or  eliminated.  Every  efficient  individual  runs  his 
personal  affairs  by  the  budget  system.  His  income  is  known,  and 
his  expenditures  are  kept  within  the  limits.  Not  what  one  wishes 
to  do,  but  what  can  be  done  within  the  limits  of  the  personal 
budget,  determines  the  individual's  activities.  An  individual  or 
a  business  which  is  run  on  any  other  plan  must  soon  fail. 

A  government  budget  system  is  designed  to  do  the  same  thing 
for  government.  The  intelligent  control  of  public  expenditures  is 
the  end  in  view.  Foreign  countries  have  long-,  under  the  pinch 
of  necessity,  found  it  necessary  to  make  a  scientific  study  of 
government  expenses.  In  nearly  every  foreign  country  the  budget 
system  has  been  established  and  designed  to  give  :  ( 1 )  An  account 
of  official  stewardship  by  the  executive  branch  of  the  government ; 
(2)  a  complete,  understandable  statement  of  present  financial  con- 
ditions and  estimates  of  future  needs;  (3)  a  basis  for  planning 
future  work ;  (4)  a  means  by  which  the  work  of  the  executive 
branch  of  the  government  which  spends  the  money  is  brought  into 
close  cooperation  with  the  legislative  branch  which  appropriates  it. 

A  budget  may,  therefore,  be  defined  as  a  statement  of  probable 
revenues  and  estimated  expenditures  in  detail,  and  of  financial 
plans  and  proposals  for  the  ensuing  year  presented  by  the  executive 
branch  to  the  legislative  body.  In  more  common  parlance  it  may 
be  defined  as  an  official  attempt  to  make  both  ends  meet. 

A  budget  under  this  definition  is  a  scientific  estimate  of  the 
funds  needed  by  the  various  departments  of  government;  a  state- 
ment of  the  total  revenue  and  its  sources;  a  scheme  to  prevent 
the  padding  of  appropriations  by  assuring  that  all  requests  are 
uniformly  itemized  and  carefully  scanned;  lastly,  and  perhaps  the 
most  important,  the  budget  is  a  method  of  impressing  upon  the 
tax-spenders  the  fact  that  they  have  some  responsibility  to  tax- 
payers; that  economies  must  be  effected  in  some  instances  when 
the  public  welfare  is  not  promoted,  and  that  liberal  expenditures 
shall  be  made  when  the  public  welfare  is  promoted,  but  that  in 
all  cases  the  revenue  shall  be  in  sight  before  the  expenditure  is 
authorized. 

WHAT  A  BUDGET  SYSTEM  WILL  Do 

1.  It  will  place  government  finances  on  the  same  basis  as  cor- 
poration finances. 

10-2902 


146  INDIANA    UNIVERSITY 

2.  It  will  give  a  continuous  financial  plan  for  the  nation,  State, 
or  city,  thereby  preventing  administrative  officials  from  spending 
money  for  a  purpose  more  extensive  than  contemplated  by  the 
legislature,  and  then  coming  back  with  the  project  half  completed 
for  more  money  at  the  next  session. 

3.  It  will  act  as  a  check  on  administrative  officials  who  are 
tempted  to  spend  sums  extravagantly  just  before  lapsing  time. 

4.  It  will  furnish  a  source  of  up-to-date  information  on  the 
status  of  each  department. 

5.  It  will  discourage  the  practice  of  passing  appropriations  in 
a  lot  of  small  bills,  thereby  hiding  the  real  magnitude  of  the  total. 

6.  It  will  acquaint  the  legislature  and  the  public  with  the 
sources  of  revenue,  thereby  bringing  pressure  to  bear  upon  the 
legislators  to  keep  the  expenditures  within  the  revenues. 

7.  It  will  find  proper  sources  of  new  revenues  when  needed 
and  find   proper  places  to  cut  revenues  when  too   large   or  not 
equitable. 

8.  It  will  attempt  to  standardize  salaries,  purchases,  and  costs. 

9.  It  will  place  every  department  on  its  merits,  thereby  doing 
away  with  the  department  lobbyists  and  committee  spellbinders, 
and  put  appropriations  strictly  on  a  business  basis. 

10.  It  will  set  forth  the  facts  in  such  concise  form  that  the 
people  can  study  the  processes  and  view  the  financial  operations  of 
the  government  with  intelligence. 

THE  EXTENT  OF  BUDGET  PRACTICE  IN  THIS  COUNTRY 

In  this  country  very  little  attention  has  been  given  to  scientific 
budget-making.  This  may  be  partly  accounted  for  by  the  fact 
that  the  federal  government  and  most  of  our  State  governments 
have  not  yet  been  under  such  a  financial  strain  as  to  cause  them 
to  make  such  searching  investigations  for  new  revenues  as  those, 
for  example,  which  have  been  made  in  Germany,  Russia,  France, 
and  England  during  the  past  few  years.  These  countries  with 
large  military  and  naval  establishments  to  be  supported,  and 
extensive  social  programs  to  be  paid  for,  have  found  it  necessary 
to  strain  every  nerve  to  gather  in  all  possible  revenues  to  meet 
the  necessities  of  their  exchequers.  Naturally  this  has  made  them 
look  carefully  to  the  expenditures  to  see  whether  there  were  not 
some  items  that  might  be  reduced  to  a  minimum  or  perhaps 
eliminated. 

Not   so   in  this  country.     The   federal   government   has  made 


TAXATION    IN    INDIANA  147 

its  appropriations  almost  without  asking  where  the  money  was 
coming  from.  In  fact  the  abundant  revenue  of  the  federal  gov- 
ernment has  made  it  nearly  unnecessary  to  ask  this  question.  The 
plethora  of  money  has  encouraged  large  expenditures  even  for 
unnecessary  things  in  order  to  use  up  the  surplus,  and  new  sources 
of  revenue,  rich  in  possibilities,  have  been  opened  for  exploitation 
without  much  difficulty.  The  result  has  been  that  the  federal 
administration  has  grown  in  a  somewhat  lopsided  fashion. 

Five  years  ago,  President  Taft  appointed  what  became  known 
as  the  President's  Commission  on  Economy  and  Efficiency.  This 
Commission  was  composed  of  some  of  the  best  talent  in  the  country, 
and  made  a  report  favorable  to  a  federal  budget  system,  whereby 
the  President  would  submit  to  Congress  a  scientific  budget  for 
their  consideration.  No  action  has  been  taken  and,  at  present, 
no  action  seems  to  be  likely  in  carrying  out  this  recommendation. 

It  may  be  doubted  whether  such  a  plan  as  is  in  existence  in  Eng- 
land by  which  the  administration  is  held  directly  responsible  for 
the  budget,  and  where  cabinets  rise  or  fall  on  the  issues,  would 
be  feasible  in  this  country.  A  budget  system  would,  however,  give 
the  enormous  advantage  of  furnishing  a  means  by  which  the 
executive  branch  could  set  forth  a  complete,  understandable  state- 
ment of  present  financial  conditions  and  plans  for  future  develop- 
ment. Such  a  budget,  if  scientific,  would  receive  the  support  of 
all  thinking  men,  and  the  influence  for  its  adoption  would  be 
convincing. 

A  few' years  ago  Nelson  W.  Aldrich  startled  the  country  by  the 
declaration  that  $300,000,000  could  be  saved  annually  by  efficient 
business  administration.  If  the  same  proportion  of  unnecessary 
expenditures  extends  throughout  State  and  local  governments — 
and  undoubtedly  it  does — the  total  waste  would  be  a  billion  dollars 
annually.  Is  it  not  about  time  that  the  business  sense  of  the  nation 
asserted  itself  and  put  this  declaration  to  the  test  through  a  system- 
atic budget? 

Likewise  in  the  States  of  this  country  there  has  been  practically 
no  effort  made  to  prepare  and  utilize  a  scientific  budget.  Not  until 
1911  was  there  any  State-wide  attempt  to  formulate  a  scientific 
budget  and  the  only  legislation  upon  the  subject  was  passed  in  1913 
in  the  States  of  Ohio  and  Illinois. 

The  State  of  Ohio  offers  the  best  example  of  the  scope  and  pur- 
pose of  budget-making  yet  outlined  in  any  State.  The  governor 
is  directed  by  an  Act  of  1913  to  submit  to  the  legislature  a  budget 
of  current  expenses  for  the  following  biennial  period,  together  with 


148  INDIANA   UNIVERSITY 

the  estimates  of  the  departments,  institutions,  commissions,  and 
officials. 

This  information  is  secured  by  the  governor  in  two  ways.  First, 
all  institutions,  boards,  officials,  and  commissions  are  required  to 
submit  an  itemized  statement  of  needs  on  or  before  the  15th  of 
November  prior  to  the  convening  of  the  General  Assembly.  Before 
the  same  date  the  Auditor  of  State  is  required  to  report  to  the 
Governor,  statements  as  follows: 

1.  A  statement  showing  the  balance  standing  to  the  credit  of 
the  several  appropriations  of  each  department,  institution,  commis- 
sion, and  office  of  the  State,  and  for  each  and  every  current  purpose 
of  the  State  government  at  the  end  of  the  last  fiscal  year. 

2.  A  statement  showing  the  monthly  revenues  and  expendi- 
tures from  all  the  appropriation  accounts  in  the  twelve  months  of 
the  last  fiscal  year. 

3.  A  statement  showing  annual  revenues  and  expenditures  of 
each  appropriation  account  for  each  year  of  the  last  four  fiscal  years 
in  which  any  appropriation  account  has  existed. 

4.  A  statement  showing  the  monthly  average  of  such  expendi- 
tures from  each  of  the  several  appropriation  accounts  for  the  last 
fiscal  year  and  also  the  total  monthly  average  from  all  of  them  for 
the  last  four  years. 

The  second  way  in  which  the  Governor  secures  information  is 
by  the  appointment  of  assistants  to  examine  into  the  affairs  of 
every  department,  institution,  public  work,  commission,  or  office, 
and  to  make  findings  and  recommendations  relative  to  "increasing 
the  efficiency  and  curtailing  the  expense  thereof."  Under  this 
provision  the  Governor  has  appointed  a  Budget  Commissioner. 
This  Commissioner  and  his  assistants  have  the  power  to  compel  the 
attendance  and  testimony  of  witnesses  and  to  compel  the  produc- 
tion of  books  and  papers.  All  officers  of  the  State  are  required, 
upon  request  of  the  governor,  to  furnish  any  information  relating 
to  the  affairs  of  their  respective  offices. 

It  will  be  observed,  therefore,  that  budget-making  as  carried  on 
in  Ohio  does  not  consist  in  merely  submitting  a  statement  of  appro- 
priations for  former  years  and  a  recommendation  for  the  ensuing 
period,  but  it  consists  in  determining  the  whole  question  of  the  chan- 
nels of  public  expenditures.  It  involves,  therefore,  careful  research 
into  all  matters  which  affect  the  financial  operations  of  the  State. 
The  Budget  Commissioner  serves  as  a  clearing-house  upon  the  ac- 
tivities of  the  State  government  and  their  cost. 


TAXATION   IN   INDIANA  149 

Contrast  this  method  of  presenting  estimates  to  the  legislature 
with  the  system  in  vogue  in  most  States  under  which  the  legisla- 
ture has  before  it  only  the  ex  parte  testimony  of  interested  persons 
concerning  statements  and  arguments  in  support  of  alleged  needs 
which  it  is  nobody's  particular  business  to  examine  critically,  and 
which  in  the  absence  of  research  could  not  readily  be  refuted. 
"The  Budget  Commissioner  in  Ohio,"  says  that  official,  "provides 
a  means  of  obtaining  an  impartial  statement  of  facts  which  have 
been  obtained  by  diligent  research  and  are  submitted  by  a  State 
department  which  has  no  axes  to  grind  and  which  is  biased  by  no 
considerations  of  prejudice  or  favor. ' ' 

In  Illinois  the  Legislative  Reference  Bureau  is  required  to  pre- 
pare a  budget  for  presentation  to  the  legislature.  But  the  law 
does  not  authorize  the  Bureau  to  make  the  researches  which  are 
necessary  to  determine  the -essential  facts.  This  system  will  doubt- 
less serve  the  purpose  of  giving  information  concerning  appropria- 
tions in  concise  form;  but  beyond  that  it  does  not  amount  to  very 
much  more  than  the  work  of  the  Indiana  Legislative  Investigating 
Commission,  except  that  it  has  the  advantage  of  permanence  and 
has  at  its  disposal  greater  facilities  for  carrying  on  its  work. 

In  the  State  of  Indiana  we  have  what  amounts  to  a  nucleus  for  a 
budget  system  which  might  readily  be  expanded  and  be  made  to 
serve  at  least  the  informational  purpose  of  a  budget.  In  fact,  the 
work  of  the  investigating  committee  already  does  that  to  a  large 
degree  for  State  institutions.  The  committee  consists  of  three  mem- 
bers, not  more  than  two  of  whom  are  members  of  the  same  party. 
They  are  appointed  by  the  Governor  immediately  after  election 
from  the  members-elect  of  the  General  Assembly.  This  committee 
organizes  immediately  and  spends  the  time  until  after  the  open- 
ing of  the  session  in  visiting  the  institutions  and  listening  to  the 
needs  of  the  representatives  of  institutions  and  State  officials.  On 
the  basis  of  the  facts  presented  the  committee  formulates  the  ap- 
propriation bill  which  is  presented  to  the  General  Assembly. 

The  reports  which  the  various  committees  have  made  each  bien- 
nium  are  among  the  most  valuable  documents  of  the  State,  giving 
as  they  do  much  valuable  information  upon  each  of  the  State  in- 
stitutions and  departments.  Moreover,  they  have  been  very  effec- 
tive in  formulating  the  appropriation  in  cases  where  the  majority 
of  the  committee  were  in  the  majority  in  the  General  Assembly. 
Membership  on  the  investigating  committee  is  often  looked  upon  as 
the  stepping-stone  to  membership  on  the  Ways  and  Means  Commit- 
tee of  the  House  and  to  the  Finance  Committee  of  the  Senate. 


150  INDIANA    UNIVERSITY 

When  this  succession  has  been  followed  there  has  been  a  continuity 
of  the  work  of  the  committee  in  the  General  Assembly. 

It  may  be  asked,  Why  does  not  this  practice  constitute  a  budget 
system  in  the  sense  in  which  that  term  is  understood  ?  That  it  has 
many  of  the  investigative  elements  of  a  budget  system  is  readily 
seen,  but  it  falls  short  of  a  budget  system  in  that  it  does  not  repre- 
sent the  executive  department  and  is  not,  therefore,  an  account  of 
the  official  stewardship  of  the  administration.  It  is  not  responsible 
to  either  the  executive  or  the  legislature.  It  does  not  go  into  the 
financial  conditions  of  the  State  and  present  a  complete,  under- 
standable statement  of  present  conditions.  It  does  not  systemati- 
cally itemize  appropriations  by  a  uniform  method.  It  does  not  plan 
for  future  work,  and  above  all  it  does  not  make  the  researches  with- 
out which  a  true  budget  system  is  impossible.  In  one  way  it 
amounts  to  the  same  thing  as  the  ordinary  appropriation  committee 
of  Congress  or  of  the  State  legislature,  but  it  has  the  advantage  of 
allowing  more  time  for  personal  examination.  To  make  of  this 
system  a  true  budget  system  would  require  that  the  committee  be 
permanent  and  be  authorized  by  themselves  or  their  assistants  to 
make  researches  into  all  phases  of  the  financial  operations  of  the 
institutions  and  departments.  Lastly,  it  should  represent  directly 
the  executive  or  administrative  department. 

Perhaps  the  greatest  development  in  budget  systems  is  found 
in  the  cities  of  the  country  where  the  pinch  of  necessity  has  been 
more  keenly  felt,  and  there  budget  systems  have  been  more  prac- 
tically effective.  City  governments  compelled  to  get  along  within 
a  certain  debt  limit  and  a  certain  rate  of  taxation  have  been  com- 
pelled to  scrutinize  carefully  all  expenditures  in  order  that  they 
may  be  fitted  to  the  definitely  known  income. 

It  is  a  common  practice  for  the  budgets  to  be  made  up  by  the 
financial  officer  of  the  city,  and  in  many  instances  they  represent 
the  plans  and  policies  of  the  city  administration.  Very  few  are 
made,  however,  with  the  scientific  budgetary  knowledge  necessary 
to  their  success.  Within  recent  years  the  idea  of  presenting  the 
budget  to  the  public  has  received  considerable  impetus.  Today  in 
many  cities  of  the  country  budget  exhibits  set  forth  the  work  of 
each  department  or  institution  in  graphic  form,  showing  the  appro- 
priations asked  for  alongside  of  the  work  to  be  done.  New  York 
and  Cincinnati  have  had  conspicuous  success  in  public  exhibits. 
Hundreds  of  thousands  of  people  have  visited  these  exhibits  in  New 
York  City,  and  Cincinnati 's  budget  system  has  been  no  less  success- 


TAXATION    IN    INDIANA  151 

ful.  The  civic  education  accomplished  thereby  is  an  enormous  by- 
product of  the  setting  forth  of  the  budget  in  graphic  form. 

Indiana  can  well  afford  to  look  seriously  into  the  question  of 
adopting  a  budget  system  for  the  State  and  for  the  cities  and  coun- 
ties. While  waiting  for  the  slow  progress  of  constitutional  changes 
to  open  the  way  for  reform  in  taxation,  the  problem  may  be  at- 
tacked by  way  of  the  budget  without  any  delay.  Broad  founda- 
tions will  thus  be  laid  for  a  complete  reform  of  taxation  when  a 
complete  reform  shall  become  possible  under  our  constitution. 

The  budget  is  possible  of  immediate  application.  Some  things 
we  cannot  have,  but  the  things  which  we  can  get  out  of  the  budget 
system  can  be  adopted  at  this  coming  session  of  the  legislature,  not 
only  for  the  State  but  for  the  cities.  It  is  a  question  as  to  whether 
we  want  it.  If  we  do  want  it  we  can  readily  have  it. 

THE   CLASSIFICATION   OF   PROPERTY   FOR   TAXATION 
SENATOR  EVAN  B.  STOTSENBTJRG,  New  Albany 

The  topic  assigned  me  on  the  program  is  ' '  The  Classification  of 
Property."  I  assume  it  to  mean  the  classification  of  property  for 
taxation.  The  other  day  when  I  sat  down  to  write  this  article  I 
headed  it  as  the  topic  was  assigned  to  me,  and  completed  the  article. 
After  I  had  finished  it  and  read  it  over,  I  saw  that  it  would  have 
been  better  entitled  ' l  The  Evils  of  the  Present  System  of  Taxation 
in  Indiana."  It  has  been  my  misfortune  to  be  able  to  attend  but 
one  session  of  this  conference.  I  have  no  doubt  that  all  I  have  to 
say  in  this  paper  has  been  said  many  times  during  the  session,  and 
much  better  than  I  will  be  able  to  say  it.  But  I  want  you  to  put 
yourselves  in  the  frame  of  mind  of  the  convict  in  one  of  the  South- 
ern States  who  was  compelled  to  work  on  the  public  highways  under 
the  laws  of  the  State.  One  day  when  the  convict  was  out  working 
on  the  highways,  a  gentleman  passed  on  the  road  in  an  automobile. 
He  came  to  a  small  creek  which  he  had  to  ford.  In  doing  so  he 
thought  it  would  be  a  good  opportunity  to  fill  the  tank  witji  water, 
and  stopped  his  machine  in  the  creek  to  fill  the  tank.  The  creek 
was  rather  shallow,  and  while  he  was  filling  the  tank — it  took  some 
time,  of  course — this  convict  came  up  behind  him  with  a  load  of 
dirt,  and  not  being  able  to  pass,  stopped.  The  gentleman  kept  on 
filling  his  tank.  Finally  he  looked  back  and  seeing  the  man  wait- 
ing there  said  to.  him,  "My  good  fellow,  I  will  be  through  in  just  a 
minute."  The  convict  replied,  "You  needn't  mind  hurrying;  I 


152  INDIANA   UNIVERSITY 

have  twenty  years."  I  hope  you  will  put  yourselves  in  the  same 
frame  of  mind  as  to  patience. 

During  the  nearly  one  hundred  years  of  Indiana's  existence  it 
lias  progressed  wonderfully  in  many  ways ;  in  its  method  of  taxation 
hardly  a  step.  Although  in  their  first  constitution  the  people  of 
Indiana  did  not  hamper  themselves  with  restrictions  on  the  right 
of  taxation,  they  did  do  so  in  the  first  statutory  law  on  the  subject. 
Since  then,  at  first  by  statutory  law  and  later  by  the  constitution 
itself,  everything,  whether  lands,  tenements,  chattels,  money,  rights, 
credits,  or  choses  in  action,  for  the  purposes  of  taxation  has  been 
denominated  property  and -declared  subject  to  taxation — all  on  the 
same  basis  of  valuation  and  at  the  same  rate.  As  long  as  Indiana 
was  a  borrowing  State,  the  evils  of  the  general  property  tax  plan 
according  to  which  all  property  of  all  classes  and  description  is 
assessed  ad  valorem  upon  an  "equal  and  fair  cash  basis"  and  at 
one  and  the  same  rate  were  not  so  apparent  nor  so  disastrous.  As 
long  as  a  high  rate  of  interest  was  being  paid  for  money  in  the 
Middle  West  and  the  Eastern  States  were  sending  money  into  the 
West  for  investment  the  evils  of  classifying  notes,  bonds,  accounts, 
deposits  in  bank,  and  money  with  real  and  personal  property  were 
not  apparent.  Even  when  Indiana  changed  from  an  agricultural 
State  to  one  of  diversified  interests  and  its  people  became  lenders 
instead  of  borrowers,  the  defects  of  this  system  were  still  unnoticed. 
When,  however,  the  States  around  us  began  to  change  their  taxing 
laws,  so  as  to  permit  their  people  to  own  stocks,  bonds,  and  money, 
and  to  retain  them  without  committing  annual  perjury,  then  In- 
diana commenced  to  take  notice.  In  order  to  retain  in  the  State 
not  only  stocks,  bonds,  notes,  money,  but  the  people  who  own  them 
as  well,  Indiana  must  have  laws  as  inviting  to  the  owners  of  such 
property  as  do  our  neighboring  States. 

No  system  of  taxation  is  justified  which  takes  from  any  class 
of  property  its  annual  increment.  No  system  of  taxation  is  justi- 
fied which  classes  intangible  property  such  as  stocks,  bonds,  notes, 
mortgages,  money,  credits,  and  deposits  with  real  estate  and  other 
tangible  property.  Such  a  system  is  not  only  unjust  to  the  owners 
of  intangible  property,  but  it  is  also  unjust  to  the  owners  of  tangible 
properly.  Such  a  system  punishes  the  man  who  is  honest  enough 
to  return  all  of  his  property  for  taxation;  such  a  system  rewards 
the  man  who  is  dishonest  enough  to  withhold  his  property  from  tax- 
ation ;  such  a  system  lowers  the  standard  of  integrity  in  the  State, 
because  the  practice  of  tax-dodgers  must  necessarily  affect  the 
morals  of  the  community ;  such  a  system  bars  all  growth  from  with- 


TAXATION   IN   INDIANA  153 

out,  and  expels  all  growth  from  within;  such  a  system  restricts 
future  revenue  and  future  prosperity.  In  an  address  before  the 
National  Tax  Association,  the  Master  of  the  State  Grange  of  Ohio 
thus  characterized  the  system: 

For  two  generations,  the  farmers  of  the  United  States  have  in  large 
majority  cherished  the  belief  that  a  uniform  rate  upon  all  property  at  its 
true  value  in  money  was  the  highest  conception  of  fairness  and  justice  be- 
tween man  and  man.  It  sounds  fair,  but  experience  and  all  history  prove 
that  its  fairness  begins  and  ends  in  sound.  For  it  to  be  entirely  fair,  one 
must  go  back  to  a  period  when  all  property  was  visible  and  equally  pro- 
ductive. As  soon  as  property  became  diversified,  yielding  different  incomes, 
giving  rise  to  intangible  property,  the  general  property  tax  became  unsound 
from  an  economic  standpoint  and  unjust  as  between  individuals.  When 
this  system  of  taxation  was  imbedded  in  the  constitution  of  Ohio  and  older 
States  it  had  less  to  condemn  it,  as  the  proportion  of  visible  property  was 
much  greater.  It  was  not,  however,  a  correct  principle  then,  and  it  is 
entirely  false  now 

The  farmer  more  nearly  than  any  class  of  taxpayer  has  his  property 
invested  in  things  visible,  in  stock,  herds,  implements,  land,  and  improve- 
ments. Every  dollar  of  intangible  property,  therefore,  returned  for  taxa- 
tion lightens  his  burden.  The  line  between  the  owners  of  tangible  and 
intangible  property  is  as  sharply  drawn  as  was  the  line  between  the  Blue 
and  the  Gray,  and  the  contest  is  equally  fierce,  but  with  this  difference,  that 
the  victory  always  goes  one  way — to  the  intangible— and  always  will  under 

the  general  property  tax We  have  sought  for  fifty-seven  years 

to  reach  this  class  of  property  for  taxation  and  signally  failed,  with  the 
situation  growing  worse  as  taxpayers  become  more  adept  in  evading  pay- 
ment. Since  intangible  property  is  not  returned  now,  even  with  the  most 
drastic  laws,  nothing  is  to  be  lost  by  any  effort  we  may.  make  to  secure  its 

return If  the  new  plan  be  adopted  and  results  do  -not  justify 

our  expectations,  the  permissive  nature  of  the  amendment  will  allow  an  im- 
mediate return  to  the  present  system,  or  trial  of  any  other  system  by  the 
passage  of  any  law  that  may  be  thought  desirable  or  expedient  at  the  time. 

This  condemnation  of  the  system,  coming  as  it  does  from  a 
farmer,  is  worthy  of  note.  Yet  we  have  this  system  in  Indiana  to- 
day and  have  always  had  it,  and  will  continue  to  have  until  the 
public  generally  is  convinced  of  the  evils  of  it. 

Under  this  system  a  bank  deposit  of  $3,000  for  checking  pur- 
poses, drawing  no  interest  or  income,  if  returned  for  taxation — 
and  the  law  requires  it  to  be  returned — would  pay  the  same  taxes 
as  a  house  and  lot  valued  for  taxation  at  $3,000  and  producing  an 
annual  return  of  probably  ten  per  cent.  A  promissory  note  for  one 
hundred  dollars,  earning  annually  six  dollars  interest,  is  taxed  at 
the  same  rate  as  a  draft  horse  worth  $200  and  capable  of  earning 
at  a  low  estimate  50  cents  per  day.  A  bond  for  $2,000  drawing 


154  INDIANA    UNIVERSITY 

yearly  interest  must  pay  the  same  taxes  as  a  farm  worth  $4,000, 
taxed  at  $2,000  and  capable  of  supporting  a  family.  These  illus- 
trations show  the  injustice  of  the  system.  The  system  is  not  only 
unjust,  it  is  disastrous.  In  Bloomington,  with  a  tax-rate  of  4.80 
dollars  per  hundred  dollars'  valuation,  the  owner  of  a  4  per  cent 
bond  would  be  better  off  if  he  gave  it  away.  The  average  tax-rate 
for  all  purposes  in  the  cities  of  Indiana  will  exceed  3  dollars  per 
hundred.  No  citizen  can  afford  to  own  and  return  for  taxation  at 
their  face  value,  as  the  law  requires,  stocks,  bonds,  notes,  bank  de- 
posit, or  money.  The  result  is  that  the  owner  either  leaves  the 
state  or  he  sequesters  his  property.  In  Indiana,  although  there  are 
many  millions  of  dollars  on  deposit,  practically  no  cash  is  returned 
for  taxation;  although  many  millions  of  dollars  are  invested  in 
stocks  and  bonds,  an  insignificant  amount  is  returned  for  taxation ; 
although  millions  of  dollars  are  invested  in  promissory  notes,  se- 
cured and  unsecured,  the  amount  returned  for  taxation  is  negligible. 
And  each  year  the  amount  of  such  property  returned  for  taxation  is 
decreasing.  Lands  and  improvements  have  been  and  will  always 
remain  the  species  of  property  which  must  bear  the  greatest  burden 
of  taxation.  They  are  visible  and  permanent  and  cannot  escape. 
Every  dollar  of  property  which  escapes  taxation  makes  the  burden 
on  lands  and  improvements  that  much  heavier.  The  attempt  to 
enforce  our  present  tax  laws  has  always  resulted  in  driving  capital 
and  the  owners  of  capital  from  the  State.  You  people  in  the  center 
of  the  State  do  not  appreciate  how  easy  it  is  to  give  up  one's  resi- 
dence and  move  into  another  State.  We  who  live  on  the  border  do 
appreciate  it.  Down  in  Southern  Indiana  for  the  last  two  years 
we  have  been  experimenting  with  the  employment  of  tax  ferrets. 
The  result  has  been  that  in  one  county  alone  two  dozen  or  more  sub- 
stantial citizens  have  moved  into  Kentucky,  taking  all  they  own  ex- 
cept their  real  holdings,  which  have  been  thrown  on  the  market  to 
the  disadvantage  of  other  property.  By  their  going  the  State,  the 
county,  and  the  city  have  all  lost  the  annual  revenue  they  otherwise 
would  receive ;  the  community  has  lost  the  very  considerable  amount 
that  these  people  would  have  expended  for  their  living  and  their 
pleasures.  The  cause  of  their  going  has  prevented  others  from  com- 
ing to  take  their  places.  The  States  around  us  by  adopting  taxing 
laws  either  classifying  property,  or  by  permitting  the  registration 
for  a  nominal  fee  of  securities,  are  inviting  the  capital  of  Indiana 's 
citizens  to  leave  the  State.  Capital  is  leaving  the  State,  and  in 
most  cases  taking  its  owners  with  it. 

Southern  Indiana  has  many  advantages  which  should  insure  it 


TAXATION.  IN    INDIANA  155 

prosperity  and  a  natural  healthy  increase  in  population.  The  Ohio 
river  flows  along  our  southern  border  and  affords  cheap  transporta- 
tion. We  have  coal,  stone,  and  timber.  The  bottom  lands  are  the 
best  farming  lands  in  the  State,  and  the  uplands  cannot  be  equaled 
for  small  fruit  growing,  orchards,  and  vineyards.  The  southern 
part  of  the  State  is  well  supplied  with  railroads.  Yet  the  census  of 
1910  shows  that  all  but  two  counties  of  those  bordering  on  the  Ohio 
river  lost  in  population  during  the  last  decade.  Our  taxing  system 
may  not  be  entirely  the  cause  of  this  loss,  but  it  has  contributed  to  it. 

What  plan  of  classifying  property  is  suggested  which  will  light- 
en the  burdens  of  taxation  as  far  as  possible  and  correct  the  evils 
of  our  -present  system  ?  It  is  obvious  that  real  estate  with  its  im- 
provements and  other  like  tangible  property  must  be  put  in  a  class 
by  themselves,  and  that  the  principal  part  of  the  revenue  must  be 
derived  from  such  property.  Household  goods  and  effects  up  to 
the  amount  of  about  $200  should  bear  only  a  nominal  tax.  House- 
hold effects  over  a  valuation  of  $200  and  all  other  personal  proper- 
ty should  be  put  in  a  class  and  taxed  at  the  same  rate  as  real  estate. 
Money,  deposits,  promissory  notes,  bonds,  judgments,  mortgages, 
and  all  credits  should  be  put  in  a  class  by  themselves  and  taxed  at 
about  one-tenth  of  the  rate  that  real  estate  is  taxed.  It  might  be 
wise  to  omit  checking  deposits  altogether,  so  as  to  encourage  the  de- 
posit of  money  in  local  banks.  Bonds  issued  by  the  State  and  mu- 
nicipalities should  not  be  exempted  from  taxation,  but  should  bear 
the  same  rate  of  taxation  as  other  bonds.  The  system  suggested  for 
the  classification  of  property  for  taxation,  as  you  all  know,  has  been 
tried  in  other  States,  and  wherever  tried,  it  has  resulted  in  an  in- 
creased return  for  taxation  of  many  times  the  amount  of  intangi- 
ble property  over  what  was  formerly  returned,  and  in  a  correspond- 
ing increase  in  revenue.  You  are  all  familiar  with  the  result  in 
States  like  Maryland,  which  has  a  system  of  classification  of  prop- 
erty with  a  different  rate  for  each  classification,  and  New  York, 
which  has  a  system  for  the  registration  of  stocks,  mortgages,  and 
bonds.  Let  me  refer  to  the  example  in  Maryland  which  has  been 
so  often  cited. 

In  1896  an  act  was  passed  fixing  the  tax-rate  by  cities  or  counties 
on  "Securities" — intangible  personal  property — at  30  cents  on  the 
$100.  The  "uniform  rate"  on  all  property  had  proved  a  farce,  in 
its  results.  Now  note  the  gain  in  actual  revenue,  at  the  reduced 
rate,  because  of  the  large  increase  in  volume  returned  to  the  asses- 
sor, in  the  City  of  Baltimore  alone,  and  the  steady,  strong  increase 
year  by  year. 


156  INDIANA   UNIVERSITY 

Assessed  Value  of  Securities  Taxed 

1896 $6,000,000  1903 $94,000,000 

1897   55,000,000  1904  85,000,000 

1898  55,000,000  1905  104,200,000 

1899 61,900,000  1906  120,400,000 

1900  . . 65,800,000      1907 150,900,000 

1901  68,900,000      1911   165,834,000 

1902   89,900,000 

The  table  shows  a  large  increase  the  first  year  (1897),  and  a 
steady  increase  thereafter  to  over  400  per  cent  in  ten  years.  At  the 
rate  of  even  2  dollars  on  the  $100,  $6,000,000  yields  in  revenue 
$120,000;  at  a  rate  of  30  cents  on  the  $100,  $165,834,000  yields 
about  $500,000  annually. 

Such  a  system  as  is  used  in  Maryland  is  at  least  worthy  of  a 
trial  in  Indiana.  We  certainly  can  lose  nothing  by  making  the 
attempt.  The  average  man  would  prefer  to  be  honest;  he  would 
prefer  to  return  his  property  for  taxation  and  to  pay  a  reason- 
able amount  of  its  increase  or  earnings  for  sustaining  the  govern- 
ment. A  system  which  would  put  stocks,  bonds,  notes,  and  mort- 
gages in  a  class  by  themselves,  and  impose  upon  them  a  tax  of, 
say,  30  cents  on  each  one  hundred  dollars  of  their  fair  value 
would  not  be  prohibitive,  and  this  system,  coupled  with  a  law 
which  would  make  all  such  property  non-collectible  until  registered 
for  taxation,  would,  I  predict,  be  productive  of  much  revenue. 

The  correction  of  the  present  evils  in  the  taxing  system  of 
Indiana  can  be  solved  only  by  a  constitutional  amendment  author- 
izing the  classification  for  taxing  purposes  of  different  kinds  of 
property,  and  this  means  that  you  must  convince  a  majority  of 
the  people  of  Indiana  of  the  injustice  of  the  present  system.  To 
do  this  the  feeling  which  commonly  prevails  among  the  masses 
that  the  rich  are  escaping  their  just  portion  of  the  expenses  of 
the  government  must  be  reckoned  with.  To  overcome  this  feeling 
the  people  must  not  only  be  convinced  of  the  injustice  of  the 
present  system,  but  they  must  also  be  convinced  that  they  them- 
selves will  be  materially  benefited  by  the  proposed  change. 

If  it  were  my  task  to  try  to  convince  the  people  of  the  desir- 
ability of  a  change  I  would  commence  by  showing  them  how 
desirable  it  is  to  have  capital  in  a  community.  Money  in  bank 
means  money  to  carry  on  business  of  all  kinds,  money  to  move 
crops,  money  to  lend,  money  to  borrow,  and  all  these  mean  stocks, 
bonds,  notes,  and  mortgages.  Much  money  means  a  lower  rate  of 
interest.  The  ownership  of  these  credits  in  a  community  means 


TAXATION   IN  INDIANA  157 

also  more  people  and  more  money  spent  in  the  community.  It 
means  that  the  earnings  for  money  lent,  which  otherwise  would 
go  abroad,  will  stay  at  home.  All  this  means  prosperity.  Even 
if  convinced  of  this,  the  average  citizen  will  still  argue  that  stocks, 
bonds,  choses  in  action,  and  money  are  all  property  and  should 
bear  their  proportion  of  the  burdens  of  taxation,  and  we  are  forced 
to  agree  with  him.  It  is  patent  that  this  class  of  property  is 
seldom  returned  for  taxation.  We  have  shown  that  it  is  either 
sequestered  or  has  been  driven  from  the  State.  Practically  no 
revenue  is  produced  from  it.  After  showing  the  average  tax- 
payer the  injustice  of  the  present  system  and  the  desirability  of 
a  change,  if  he  can  be  convinced  that  more  revenue  will  be  pro- 
duced by  a  different  classification  of  property,  and  his  own  burden 
thereby  lightened,  he  will  readily  consent  to  amending  the  funda- 
mental law  so  that  such  a  change  can  be  brought  about. 

Two  years  ago,  seeing  the  inevitable  result  if  our  taxing  laws 
were  not  changed,  I  introduced  in  the  Indiana  Senate  a  resolu- 
tion having  for  its  object  the  amendment  of  Section  1,  Article  10 
of  the  constitution.  The  present  section,  omitting  the  exempting 
clause,  reads  as  follows: 

The  General  Assembly  shall  provide  by  law  for  a  uniform  and  equal 
rate  of  assessment  and  taxation,  and  shall  prescribe  such  regulations  as 
shall  secure  a  just  valuation  for  taxation  of  all  property,  both  real  and 
personal. 

The  proposed  amendment,  omitting  the  exempting  clause,  reads : 

The  General  Assembly  shall  provide  by  law  for  the  assessment  of 
property  for  taxation  and  the  raising  of  revenue  thereby;  and  shall  pre- 
scribe such  regulations  as  shall  secure  a  just  valuation  for  taxation  of  all 
property  both  real  and  peTsoual.  In  enacting  laws  for  the  assessment  of 
property  for  taxation  the  General  Assembly  shall  have  the  right  to  classify 
different  kinds  of  property  and  to  provide  for  a  different  manner  and  basis 
of  assessment  and  rate  of  taxation  for  each  class. 

This  amendment  was  agreed  to  by  both  branches  of  the  Gen- 
eral Assembly,  and  will  come  before  the  next  General  As- 
sembly for  adoption  or  rejection.  If  it  gets  to  the  people 
and  is  agreed  to  by  them,  it  will  permit  the  enactment  of  a  law 
classifying  property  for  taxation  into  different  classes  with  a  dif- 
ferent system  of  valuation  and  rate  of  taxation  for  each  class. 
If  this  Association  does  nothing  more  than  to  secure  the  adoption 
of  this  or  a  similar  amendment  to  the  constitution  of  Indiana,  it 
will  have  done  a  great  benefit  to  the  people  of  Indiana. 


158  INDIANA    UNIVERSITY 

WHAT  CAN  BE  ACCOMPLISHED  UNDER  PRESENT 
CONSTITUTIONAL  LIMITATIONS 

M.  M.  BACHELDER,  Attorney,  Indianapolis 

The  subject  which  I  have  to  discuss  is  hardly  a  pleasure  to  me, 
since  in  my  line  of  business  I  so  frequently  have  to  deal  with  the 
question  of  the  constitution.  Moreover,  the  fact  that  it  is  a  dry 
subject  is  also  a  reason  why  I  do  not  care  much  to  deal  with  it. 
But  considering  the  importance  of  this  question  with  reference  to 
what  I  think  the  majority  of  the  people  of  the  State  of  Indiana 
ought  to  have,  and  to  what  I  think  the  majority  of  the  people  of  the 
State  of  Indiana  want,  I  have  agreed  to  talk  to  this  meeting  upon 
this  subject. 

In  presenting  this  question  I  am  allowed  to  assume,  to  start 
with,  that  it  is  the  will  of  the  people  that  there  be  a  discrimina- 
tion made  in  that  class  of  property  which  is  known  as  either 
money  demands  or  money  credits.  It  makes  practically  no  differ- 
ence which  term  you  use.  Either  term  applies  to  all  property 
that  takes  the  form  of  a  promise  to  pay,  irrespective  of  whether 
the  form  is  that  of  a  bond,  a  promissory  note,  an  open  account, 
or  whatever  form  it  may  be.  It  does  not,  however,  apply  to 
stock  in  corporations. 

I  am  allowed  to  assume,  for  the  purpose  of  presenting  this 
matter  to  you,  that  it  would  be  just  that  a  smaller  amount  of 
money  be  placed,  as  a  tax,  upon  one  hundred  dollars  of  this  kind 
of  property  than  upon  one  hundred  dollars'  worth  of  real  estate, 
or  one  hundred  dollars'  worth  of  any  other  kind  of  property 
that  you  might  denominate  as  tangible  property,  because  I  con- 
sider that  this  class  of  obligation  is  what  you  might  call  intangible 
property.  Assuming  that  it  is  right,  that  it  is  just,  that  either 
no  tax  be  collected  upon  this  kind  of  property,  or  that  a  smaller 
amount  be  collected  on  one  hundred  dollars'  worth  than  on  one 
hundred  dollars'  worth  of  any  other  kind  of  property,  I  assume 
that  it  is  the  will  of  the  people  that  we  should  have  a  law  pro- 
viding for  collecting  no  more  than  the  amount  which  I  have  men- 
tioned. Of  course,  if  it  is  not  just  to  collect  any  less  on  one 
hundred  dollars'  worth  of  this  kind  of  property,  then  it  would 
be  in  absolute  conflict  with  the  constitution  of  the  State  of  Indiana ; 
but,  as  I  say  to  you,  I  take  this  position  on  the  hypothesis  that  it 
is  absolutely  just  to  collect  a  smaller  rate.  Before  proceeding 
upon  the  question  of  the  constitution  I  would  like  to  add  a  few 
words  on  the  question  of  the  justice  of  collecting  a  less  amount, 


TAXATION    IN    INDIANA  159 

and  see  whereby  in  collecting  a  less  amount  on  one  hundred  dol- 
lars' worth  of  that  kind  of  property  the  people  of  the  State  of 
Indiana  were  benefited.  If  they  were  benefited,  then  that  would 
be  justice. 

Let  us  take  for  example  three  farmers,  A,  B,  and  C.  A  on 
the  28th  day  of  February  has  ten  thousand  dollars  in  gold;  B  on 
the  same  day  has  nothing  but  some  feed  for  cattle ;  C  on  the  same 
day  has  ten  thousand  dollars'  worth  of  feeding-cattle.  These  three 
men  meet  on  the  day  before  the  first  day  of  March,  and  B  says 
to  C,  "I  will  buy  your  cattle  today  if  A  will  lend  me  the  ten 
thousand  dollars."  And  A  says,  "All  right;  I  will  lend  you  the 
ten  thousand  dollars  if  you  will  give  me  your  promissory  note 
bearing  six  per  cent  interest."  B  executes  his  note  to  A  and  C 
delivers  the  cattle  to  B,  and  B  delivers  the  money  that  he  borrowed 
of  A  over  to  C.  It  is  all  done  on  the  28th  day  of  February.  The 
next  day,  the  first  day  of  March,  your  assessor  comes  around  to 
assess  A,  B,  and  C.  He  assesses  A  for  ten  thousand  dollars  on 
the  promissory  note  he  holds  against  B.  He  goes  over  to  assess 
B  and  assesses  him  for  ten  thousand  dollars  on  the  cattle  which 
he  bought  of  C.  He  goes  over  to  C  and  assesses  him  for  ten 
thousand  dollars  on  the  money,  the  gold,  which  he  got  for  those 
cattle.  We  are  proceeding  on  the  hypothesis  that  all  three  of  these 
farmers  are  going  to  be  honest,  you  understand.  There  is  thirty 
thousand  dollars  that  the  assessor  has  added  to  his  book,  and  if 
the  rate  is  two  per  cent  six  hundred  dollars  in-  taxes  will  be  col- 
lected off  those  three  men  on  those  three  items. 

Suppose  that  upon  this  28th  day  of  February  A  refuses  to 
lend  B  this  money,  and  B  fails  to  buy  C's  cattle,  and  on  the  first 
day  of  March  when  the  assessor  comes  around  he  finds  them  in 
that  condition.  He  goes  to  A,  and  A  gives  in  the  ten  thousand 
dollars  in  gold  to  pay  taxes  upon.  He  goes  over  to  B,  and  B  gives 
in  nothing  except  his  feed,  which  he  gives  in  in  each  case.  He 
goes  to  C,  and  C  gives  in  the  ten  thousand  dollars'  worth  of 
cattle.  Now  he  has  exhausted  that  transaction  completely,  and 
the  assessor  has  put  upon  the  books  twenty  thousand  dollars  for 
assessment,  and  the  county  collects  four  hundred  dollars  instead  of 
six  hundred  dollars. 

Now  why  should  the  transaction  which  takes  place  on  the  28th 
day  of  February  add  the  entire  sum  of  two  hundred  dollars  more 
to  the  taxes?  What  is  there  in  existence,  I  ask  you,  more  to  be 
taxed,  practically  or  really,  that  is  a  tangible  article,  that  you 
can  put  your  fingers  upon,  in  one  case  than  in  the  other?  But 


160  INDIANA   UNIVEKSITY 

you  answer  and  say,  "Because  A  has  put  his  money  out,  and  he 
is  gathering  an  income  from  it."  Suppose  that  A  had  had  ten 
thousand  dollars'  worth  of  horses  on  this  28th  day  of  February, 
and  he  rented  them  to  B  for  a  dollar  a  month  each,  and  you 
came  around  to  tax  him.  You  only  get  the  twenty  thousand 
dollars'  worth  to  tax  instead  of  the  thirty  thousand;  and  why 
should  you  be  entitled  to  ten  thousand  dollars'  worth  more  prop- 
erty to  add  to  the  assessment  list  because  the  obligation  was  to  pay 
back  money  instead  of  paying  back  the  horses  that  had  been 
borrowed  ? 

Now  what  effect  would  it  have  upon  our  people  if  we  either 
reduce  or  take  off  altogether  the  tax  upon  money  demands  or 
money  credits? 

MR.  L.  H.  WRIGHT  (of  Columbus,  Indiana)  :  May  I  ask  you  a 
question,  Mr.  Baehelder?  Could  not  he  deduct  his  debts  from  his 
credits?  Then  he  would  not  be  paying  tax  on  the  ten  thousand. 

MR.  BACHELDER  :     He  has  none ;  he  has  no  credits. 

MR.  WRIGHT:  He  owes  ten  thousand  dollars.  If  the  assessor 
does  his  duty  he  would  instruct  him  that  he  could  deduct  that. 

MR.  BACHELDER:  He  could  not  deduct  debts  from  cattle.  He 
can  only  deduct  them  from  a  credit.  If  B  happened  to  owe  at 
the  same  time  ten  thousand  dollars  to  D,  then  he  could  deduct 
it,  but  B  does  not  owe  that.  He  could  not  deduct  it  from  cattle. 
That  is  not  the  present  law.  He  could  not  do  it  under  the  cir- 
cumstances, but  if  he  happened  to  owe  an  obligation  then  he  could 
deduct  that  obligation  that  he  owed  from  the  obligation  that  was 
owing  him. 

MR.  WRIGHT:  Suppose  this  transaction  had  taken  place  on 
the  2d  day  of  March,  would  the  result  have  been  the  same  as 
when  it  takes  place  on  the  28th  day  of  February? 

MR.  BACHELDER:  The  assessor  would  catch  it  on  the  first  day 
of  the  next  March,  if  it  were  still  in  existence.  But  suppose  he 
wanted  to  buy  these  cattle  on  the  first  day  of  January  instead  of 
the  28th  day  of  February.  Are  we  going  to  have  business  held 
up  thirty  or  sixty  or  ninety  days  in  this  country  in  order  to  avoid 
taxation  ? 

MR.  WRIGHT  :  In  all  probability  Mr.  B  could  have  put  off  the 
business  for  two  days  and  saved  the  taxes  on  ten  thousand  dollars. 


TAXATION    IN    INDIANA  161 

MR.  BACHELDER:  That  is  assuming  that  every  transaction 
would  occur  on  the  28th  day  of  February.  1  put  it  on  the  28th  day 
of  'February  for  convenience,  so  that  you  would  see  the  point  a 
little  more  clearly.  This  man  could  have  gone  on  the  first  day  of 
November  and  bought  these  cattle  with  the  expectation  of  not  send- 
ing them  off  until  June ;  but  is  he  going  to  wait  ?  You  say  he  might 
wait  two  days — he  is  not  going  to  wait  four  or  five  or  six  months. 
We  cannot  have  the  business  of  this  country  held  up  for  that  length 
of  time. 

Now  what  would  it  do  and  how  would  it  benefit  the  people  if 
we  should  lessen  the  rate,  or  lessen  the  amount  you  would  collect  as 
tax  upon  money  demands  or  money  credits?  If  a  man  who  has 
money,  cash  on  hand,  on  the  first  day  of  March  of  each  year  had  to 
pay  his  tax  in  full  the  same  as  the  man  who  owns  real  estate,  or  the 
same  as  the  man  who  owns  cattle,  he  would  have  to  pay  from  two  to 
four  per  cent  in  the  way  of  taxes ;  but  if  he  did  not  have  to  pay  any- 
thing on  a  money  demand,  or  say  if  he  had  to  pay  only  fifty  cents 
on  the  hundred  dollars  as  a  tax  upon  his  money  demand,  every  man 
who  has  money  which  he  is  not  going  to  use  himself  would  be  hunt- 
ing an  opportunity,  would  be  seeking  in  the  market  every  promis- 
sory note  that  he  could  find,  so  that  he  could  own  it  on  the  first  day 
of  March.  That  is  a  thing  this  country  wants.  The  people  need 
money.  They  want  the  money  to  be  active.  That  is  what  they 
want.  We  talk  about  increasing  the  circulation.  We  do  need  an 
increase  of  circulation.  What  keeps  it  out  of  circulation  is  the  put- 
ting of  as  high  a  tax  upon  a  promissory  note  as  is  put  upon  a  gold 
dollar.  If  you  do  that,  then  what  is  the  difference  to  the  man  who 
has  money,  as  far  as  taxation  is  concerned,  whether  he  lends  this 
money  out  or  not? 

This  proposed  law,  either  to  take  off  that  tax  or  to  reduce  the 
rate  upon  money  demands  or  money  credits,  is  going  to  be  fought, 
more  than  likely,  in  the  State  of  Indiana  by  the  banks  and  trust 
companies.  I  do  not  want  to  say  anything  unjust  against  the  man 
who  is  connected  with  a  bank  or  trust  company,  and  I  would  like 
to  say,  to  start  out  with,  that  I  have  stock  myself  in  a  trust  com- 
pany, so  that  what  I  say  will  hit  me  also.  But  I  am  going  to  tell 
you  some  plain  facts  and  some  plain  truths.  One  reason  why  our 
personal  property  has  dwindled  for  taxation  in  the  State  of  In- 
diana is  the  fact  that  the  people  deposit  their  money  in  the  banks 
and  trust  companies  and  draw  three  to  four  per  cent  interest,  and 
then  remain  silent  when  the  assessor  comes  around.  And  by  means 
of  that  deposit  the  trust  company  can  do  business  upon  that  man 's 

11—2902 


162  INDIANA    UNIVERSITY 

silence.  It  can  go  out  and  lend  money  at  five  per  cent  interest,  and 
never  pay  one  cent  upon  that  obligation  or  that  money.  That  is 
the  point,  gentlemen.  (Applause.) 

We  might  just  as  well  be  honest  upon  this  proposition.  We 
have  to  meet  it  face  to  face,  and  I  say  that  more  than  likely  when- 
ever a  bill  of  that  kind  is  presented  to  the  next  legislature  you  will 
find  some  kind  of  a  financiering  proposition,  bank  or  trust  compan- 
ies, to  knock  that  bill  and  defeat  it.  Where  is  the  man  who,  if  he 
has  ten  thousand  dollars  in  gold,  would  deposit  it  in  a  trust  company 
for  three  or  four  per  cent,  if  he  could  go  to  his  neighbor  and  lend 
him  the  ten  thousand  dollars  and  receive  six  per  cent,  and  then  could 
without  fear  walk  into  the  recorder's  office  and  place  his  mortgage 
upon  record,  and  who,  when  the  assessor  came  to  his  house,  instead 
of  dodging  and  lying  to  him,  could  stand  up  honestly  and  say  "I 
hold  a  mortgage  there  for  ten  thousand  dollars ;  I  am  willing  to  pay 
fifty  cents  on  the  hundred  dollars  tax  on  this  mortgage ' '  ?  Would 
he  not  rather  do  that,  gentlemen,  than  go  and  deposit  that  ten 
thousand  dollars  in  a  trust  company  and  draw  three  or  four  per 
cent  interest  ?  And  in  addition  to  losing  half  of  the  interest  he  has 
to  lie  to  the  assessor  when  he  comes  around.  Which  will  he  do? 
Which  is  best  for  the  people  ?  I  say  that  it  would  be  keeping  his 
money  in  circulation,  arid  if  he  keeps  his  money  in  circulation  it  will 
not  drive  you  and  me  to  the  place  where  all  the  money  in  the  State 
of  Indiana  has  drifted — into  the  coffers  of  a  bank  or  trust  company, 
or  a  place  of  that  kind.  You  and  I  are  at  the  mercy  of  the  trust 
company  or  the  bank.  We  are  forced  to  go  to  them  to  borrow  our 
own  money  in  order  to  operate  our  business.  Instead  of  that  we 
could  go  to  our  neighbor  and  to  our  friends  and  borrow  money 
directly ;  and  then  our  money  would  not  be  held  in  the  hands  of  a 
few  who,  if  they  see  a  time  coming  when  they  want  to  make  a  better 
investment  or  are  dissatisfied  with  politics  or  anything  of  that  kind, 
can  hold  us  up,  and  only  pay  three  or  four  per  cent  interest ;  who 
can  hold  to  it  for  a  while  and  make  times  hard  for  the  purpose  of 
getting  a  greater  gain  in  some  other  kind  of  investment.  Which  is 
better  ?or  the  people,  I  say  ? 

I  say  again,  on  top  of  that,  that  my  proposal  would  so  increase 
the  number  of  mortgages  and  loans  upon  the  assessor's  book  that, 
even  with  a  tax  as  small  as  is  proposed,  there  would  be  as  much,  if 
not  more,  revenue  derived  for  our  county  and  for  our  State,  under 
that  kind  of  a  law,  from  money  demands  or  money  credits,  as 
there  is  at  the  present  time ;  and  therefore  the  good  people  of  the 
State  of  Indiana  will  have  lost  nothing. 


TAXATION    IN    INDIANA  163 

Now,  ladies  and  gentlemen,  we  come  to  the  point  which  I  have 
to  discuss,  and  that  is,  Can  we  remedy  the  matter  under  the  present 
constitution?  Can  we  do  it,  and  get  what  the  people  want  under 
the  present  constitution  ?  I  say  we  can ;  and  that  there  is  no  clause 
in  the  constitution  that  prevents  it. 

Gentlemen,  our  constitution  is  not  so  framed  and  so  based  as  to 
prevent  the  people  from  having  what  is  fair  and  just.  The  Su- 
preme Court  is  not  so  constituted  as  to  prevent  the  people  of  the 
State  of  Indiana  from  having  what  is  fair  and  just.  The  constitu- 
tion of  the  State  of  Indiana  is  so  broadly  worded  as  to  give  the 
remedy  to  the  people  at  any  time  when  it  becomes  just,  and  it  has 
the  phrase  so  worded  in  the  constitution  itself. 

I  do  not  mean,  my  dear  friends,  to  stand  here  and  say  to  you 
that  the  legislature  can  go  to  work  and  fix  a  rate  different  upon  a 
money  demand  and  a  money  credit  from  that  upon  horses  or  cattle 
or  real  estate.  That  is  not  what  I  say.  That  the  legislature  can- 
not do.  That  is  not  what  it  has  to  do  in  order  to  grapple  with  this 
question.  You  must  remember  that  there  are  two  'features  to  be 
taken  into  consideration,  one  is  the  rate  and  the  other  is  the  assess- 
ment. An  equal  rate  must  go  to  all  the  people.  That  is  just.  A 
just  assessment  is  the  result  which  I  claim  under  the  constitution 
we  can  get.  That  is  what  we  want.  We  can  get  that  just  assess- 
ment by  having  a  law  enacted  by  our  legislature  for  scheduling, 
assessing,  and  taxing  that  class  of  personal  property  which  is  known 
as  money  demands  or  money  credits,  which  will  read  that  the  same 
shall  not  be  assessed  to  exceed  twenty-five  per  cent  of  the  nominal 
value  of  the  money  demand  or  money  credit  on  the  first  day  of 
March. 

Now  that  would  be -constitutional.  If  you  don't  want  it  twenty- 
five  per  cent,  have  them  make  it  ten.  If  you  don't  want  it  at  all 
you  can  leave  it  out,  but  it  is  constitutional,  and  the  Supreme  Court 
has  so  decided,  not  only  once  but  time  and  time  again.  There  is 
no  use  of  quibbling  about  the  question  of  rate.  Let  the  rate  be  the 
same.  If  they  collect  upon  the  assessed  valuation  two  per  cent  in 
Marion  county  upon  the  real  estate  and  horses  and  cattle,  they 
will  also  collect  two  per  cent  on  the  assessed  valuation  of  your 
money  demands  and  your  money  credits;  but  your  money  demand 
or  money  credit  has  been  assessed  at  not  to  exceed  whatever  per 
cent  you  agree  upon,  say  twenty-five  per  cent. 

Now,  gentlemen,  I  have  prepared  a  very  small  amount  of  au- 
thorities upon  this  question.  I  do  not  want  to  misquote  any- 
thing, and  for  the  purpose  of  not  misquoting  it  I  have  prepared  it 


164  INDIANA    UNIVERSITY 

in  writing.  I  do  not  want  to  attempt  to  quote  to  you,  gentlemen, 
Section  One,  Article  Ten  of  the  constitution  of  the  State  of  Indiana, 
because  I  might  miss  something.  But  I  want  to  read  it  to  you. 

The  General  Assembly  shall  provide,  by  law,  for  a  uniform  and  equal 
rate  of  assessment  and  taxation;  and  shall  prescribe  such  regulations  as 
shall  secure  a  just  valuation  for  taxation  of  all  property,  both  real  and 
personal,  excepting  such  only,  for  municipal,  educational,  literary,  scien- 
tific, religious,  or  charitable  purposes,  as  may  be  especially  exempted  by 
law. 

Now  you  will  remember  that  it  says  they  must  do  this,  and  they 
must  do  it  upon  all  propert}^  but  the  valuation  must  be  just.  It 
does  not  say  that  it  must  be  an  equal  valuation.  Now  then,  suppos- 
ing that  you  had  an  act  of  the  legislature  that  did  not  provide  for 
the  assessment  of  money  credits  -or  money  demands  at  all.  Not- 
withstanding the  fact  that  your  constitution  says  that  you  must 
prescribe  "a  just  valuation  for  taxation  of  all  property,"  would 
the  law  be  unconstitutional  because  you  omit  one  class  of  property  ? 
The  Supreme  Court  has  held  not.  The  Supreme  Court  holds  that 
while  this  article,  this  section  of  our  constitution,  is  mandatory 
upon  the  legislature,  yet  when  it  is  merely  mandatory  upon  the 
legislature,  if  the  legislature  fails  to  act  there  is  absolutely  no  other 
remedy.  You  are  helpless  unless  the  constitution  itself  is  so  worded 
that  it  constitutes  a  law  complete  within  itself,  without  any  action 
of  the  legislature,  and  should  it  so  be  then  it  remedies  itself,  and 
there  is  no  necessity  of  an  act  of  the  legislature. 

The  case  of  State  ex  rel.  Lewis  et  al.  vs.  Smith,  Auditor  of  Marion 
county,  decided  in  158  Ind.  543,  is  a  decision  by  the  Supreme  Court 
of  the  State  of  Indiana  with  reference  to  the  mortgage  exemption 
law,  in  which  the  Court  passed  upon  the  constitutionality  of  said 
law,  and  on  page  546  of  said  decision  the  Court  used  this  language : 

The  power  of  taxation  is  an  incident  of  sovereignly,  and  is  possessed 

by  the  government  without  being  expressly  conferred  by  the  people 

The  power  belongs  to  that  class  of  powers  known  as  political  powers,  and 
while,  in  the  genesis  of  public  government,  it  was  occasionally  exercised  by 
the  executive  branch  of  the  government,  yet  it  is  now  well  settled  that  the 

power  of  taxation  is  purely  a  legislative  function "The  extent 

to  which  it  shall  be  exercised,  the  subjects  upon  which  it  shall  be  exercised, 
and  the  mode  in  which  it  shall  be  exercised,  are  all  equally  within  the 
discretion  of  the  legislature  to  which  the  States  commit  the  exercise  of  the 
power.  The  discretion  is  restrained  only  by  the  will  of  the  people,  ex- 
pressed in  the  State  constitution  or  through  elections,  and  by  the  condition 
that  it  must  not  be  so  used  as  to  burden  or  embarrass  'the  operations  of  the 
National  Government." 


TAXATION    IN    INDIANA  165 

Judge  Cooley  in  his  work  on  taxation  says  that  the  judiciary 
can  afford  no  redress  against  oppressive  taxation  so  long  as  the 
legislature  in  enforcing  it  shall  keep  within  the  limit  of  legislative 
authority  and  shall  violate  no  express  provision  of  the  constitution. 

I  mean  that  this  is  an  authority,  gentlemen,  which  backs  up  the 
proposition  that  if  your  legislature  says  by  the  enactment  of  a 
statute  that  it  is  just  and  fair  for  money  credits  and  money  de- 
mands to  be  assessed  at  a  value  not  exceeding  twenty-five  per  cent, 
that  the  constitution  coincides  in  that  proposition.  It  is  within  the 
power  of  the  legislature;  and  it  is  not  conferred  upon  anybody 
else,  and  not  conferred  upon  the  Supreme  Court  of  the  State  of  In- 
diana, to  say  that  that  assessment  is  not  a  just  and  fair  assessment 
when  levied  by  the  legislature  of  the  State  of  Indiana. 

Upon  the  mortgage  exemption  law,  the  Court  on  page  550  uses 
this  language : 

As  to  the  requirement  of  uniformity,  we  have  to  say  that  the  act  in 
question  purports  to  be  a  law  that  is  uniform  throughout  the  State,  and,  as 
it  permits  all  persons  to  take  advantage  of  it  when  their  circumstances 
bring  them  within  its  operation,  we  are  of  the  opinion  that  it  does  not 
violate  that  requirement  of  the  constitution. 

A  law  like  the  one  which  I  have  suggested,  gentlemen,  which 
affects  every  man  that  comes  into  the  possession  of  a  money  demand 
or  a  money  credit  exactly  the  same,  would  violate  none  of  -the 
provisions  of  the  constitution  of  the  State  of  Indiana. 

And  the  Court  further  says  that,  in  its  opinion,  every  limitation 
upon  the  power  to  tax  that  is  found  within  the  limits  of  Paragraph 
One,  Article  Ten  of  our  constitution,  was  intended,  at  least  primari- 
ly, to  protect  the  taxpayer.  But  it  must  be  admitted  that  the  latter 
part  of  the  section  requiring  the  General  Assembly  to  prescribe 
such  regulations  as  shall  secure  a  just  valuation  for  taxation  of  all 
property  not  exempted  by  the  constitution  still  further  protects  the 
taxpayer  in  the  matter  of  equality  by  prescribing  a  duty  upon  the 
General  Assembly  to  provide  for  the  securing  of  a  just  valuation 
for  taxation  of  all  property  except  as  aforesaid. 

The  case  of  State  Board  of  Tax  Commissioners  et  al.  vs.  Holli- 
day  et  al.,  150  Ind.  16,  is  one  where  a  life  insurance  policy  which 
was  paid  up  and  had  an  actual  present  cash  value  was  sought  to 
be  assessed  by  the  assessor,  and  the  Supreme  Court  held  that  it 
was  in  the  power  of  the  legislature  to  select  the  subjects  for  taxa- 
tion, and  that  the  constitution  imposes  the  duty  and  limitation 
upon  the  legislature  of  providing  by  law  regulations  or  methods 


166  INDIANA    UNIVERSITY 

for  a  just  valuation  of  all  property,  but  where  the  legislature  does 
not  prescribe  such  regulation  as  to  any  particular  species  of  prop- 
erty, such  property  cannot  be  taxed. 

So  I  say,  gentlemen,  that  the  decision  in  150  Indiana  has  been 
referred  to  three  different  times  by  the  Supreme  Court  of  Indiana 
and  has  been  held  good  in  every  case.  By  that  decision,  no  species 
of  property  whatever  can  be  assessed  unless  the  legislature  pre- 
scribes the  manner  of  its  assessment.  Then  if  the  only  provision 
by  the  legislature  is  to  assess  it  at  not  exceeding  twenty-five  per 
cent  of  its  nominal  value,  who  has  the  right  to  substitute  another 
assessment?  I  say  the  constitution  does  not  and  the  Supreme 
Court  of  the  State  of  Indiana  has  not  the  power  to  do  so. 

In  the  case  of  Riley  vs.  The  Western  Union  Telegraph  Co.,  47 
Ind.  511,  for  the  same  reason  they  held  that  the  lines  and  poles 
of  said  company  in  this  State  (it  was  a  foreign  corporation)  could 
not  be  taxed. 

Cooley,  On  Taxation*  says: 

It  is  sometimes  a  serious  question  whether  a  constitutional  provision  is 
so  far  complete  and  specific  in  itself  as  to  constitute  a  sufficient  law  without 
assistance  from  legislation.  If  it  is,  it  must  be  considered  mandatory  and 
self-executing,  and  effect  must  be  given  to  it  accordingly.  If  it  is  not,  it 
simply  lays  its  mandate  upon  the  legislature,  and  will  fail  of  effect  if  that 
body  neglect  to  pass  the  necessary  laws  to  carry  out  the  will  of  the  people 
expressed  in  it. 

The  same  author  further  states  that : 

Sometimes  the  constitution  in  terms  requires  the  legislature  to  enact 
laws  on  a  particular  subject;  and  here  it  is  obvious  that  the  requirement 
has  only  a  moral  force;  the  legislature  ought  to  obey  it,  but  the  right 
intended  to  be  given  is  only  assured  when  the  legislature  voluntarily  does  it. 

We  find  that  greenbacks,  prior  to  the  year  1895,  were  not 
taxable  while  all  other  moneys  were,  and  in  1895  the  legislature 
passed  an  act  taxing  greenbacks  the  same  as  other  money.  And 
why  were  greenbacks  not  taxable  prior  to  that  time?  Because 
there  was  no  provision  by  an  act  of  the  legislature  fixing  or  pro- 
viding for  the  assessment  of  greenbacks. 

In  the  case  of  the  State  ex  rel.  Tieman  vs.  City  of  Indianapolis, 
69  Ind.  375,  on  page  378  of  said  case  the  Court  uses  the  following 
language : 

Exemption  from  taxation  should  be  based  only  on  a  well-grounded 
public  policy,  by  which  all  shall  share  in  the  benefits. 

'Page  326. 


TAXATION    IN    INDIANA  167 

So  we  can  see,  by  this  opinion,  that  exemption  of  articles  from 
taxation  is  recognized  by  our  Supreme  Court,  should  it  be  public 
policy  to  do  so  and  should  the  exemption  affect  all  alike. 

In  conclusion  I  would  say  to  you,  gentlemen,  that  the  best 
proof  in  determining  whether  a  matter  of  that  kind  would  be 
constitutional  or  not  is  to  give  it  a  test.  It  is  a  well  known  fact 
among  doctors  that  they  could  not  have  told  in  advance  whether 
a  commodity  or  a  substance  was  a  poison  by  chemical  analysis, 
and  that  the  only  way  to  tell,  to  start  with,  whether  strychnia  or 
arsenic  were  poisons  was  not  by  a  chemical  analysis,  but  by  feed- 
ing some  of  it  in  reasonably  small  quantities  to  something  alive  to 
see  whether  the  chemical  killed  it  or  not.  In  that  way  they  have 
been  able  to  determine  and  distinguish  poisons  from  other  things. 
Now  supposing  that  the  incoming  legislature  of  the  State  of  Indiana 
passes  a  law  in  keeping  with  the  ideas  of  this  convention,  then 
how  shall  it  be  tested  to  determine  whether  it  is  constitutional 
or  not?  Some  person  has  to  bring  the  suit.  No  one  has  a  right 
to  bring  the  suit  but  a  taxpayer.  There  would  be  two  kinds  of 
taxpayers  who  might  be  heard,  and  a  member  of  either  class 
might  go  in  and  file  his  complaint.  One  would  be  the  taxpayer 
who  pays  upon  a  money  demand  or  money  credit,  say,  of  ten 
thousand  dollars'  worth  of  promissory  notes.  He  utters  his 
complaint.  He  goes  into  court  under  the  law,  and  under  the 
rule  that  he  is  entitled  to  some  redress  and  that  he  cannot  be 
hurt  without  redress.  But  can  that  man  go  before  the  courts  of 
this  State,  and  into  the  courts  of  our  land,  and  maintain  that  he 
is  injured  under  a  law  of  that  kind,  because  he  is  not  made  to 
pay  more  taxes  upon  his  personal  property  than  the  law  makes 
him  pay?  No.  Therefore,  that  man  must  pay,  and  the  Supreme 
Court  will  not  let  him  off,  because  the  Supreme  Court  of  the 
State  of  Indiana  does  not  sit  for  the  purpose  of  deciding  moot 
questions  only.  Then  comes  the  other  man,  the  taxpayer  who 
pays  upon  his  real  estate.  Suppose  he  files  his  complaint,  and 
he  goes  before  the  court  to  be  heard.  The  court  would  say  to 
him,  "Why  do  you  want  this  law  set  aside?  Where  are  you 
going  to  benefit  by  setting  this  law  aside?"  "Well,  sir,"  he 
would  say,  "it  is  unfair ;  I  pay  two  per  cent  on  my  real  estate ; 
he  pays  only  one-half  of  one  per  cent  upon  his  money;  and  I 
want  the  law  declared  unconstitutional."  Well,  the  Supreme 
Court  would  have  to  say  to  him,  "Sir,  if  we  declare  this  law,  this 
act,  unconstitutional,  then  the  man  who  now,  under  the  law,  pays 
one-half  of  one  per  cent  would  pay  nothing;  and  that  is  going  to 


168  INDIANA    UNIVERSITY 

worst  you.  You  have  the  bag  to  hold,  sir.  We  cannot  see  where 
you  can  come  in  and  get  a  judgment  before  this  court  that  would 
benefit  you;  and  therefore  you  cannot  have  your  day  in  court 
upon  that  question."  For,  I  do  insist  that  if  the  Supreme  Court 
would  hold  a  clause  like  that  unconstitutional,  then  you  have  no 
provision  left  in  your  law  of  the  State  of  Indiana  providing  for 
the  assessment  of  money  demands  or  money  credits;  and  as  long 
as  you  have  not,  under  the  three  decisions  of  the  Supreme  Court 
of  the  State  of  Indiana,  which  have  been  held  by  the  United 
States  Supreme  Court  to  be  the  law  of  Indiana,  you  cannot  assess 
it  for  one  solitary  cent. 

Now,  ladies  and  gentlemen,  I  want  to  thank  you  all  for  the 
kind  attention  you  have  given  me.  I  do  hope  that  every  taxpayer 
in  the  State  of  Indiana  who  thinks  anything  of  a  good  tax  law7 
will  see  to  it  that  the  member  of  the  legislature  from  his  county 
will  come  to  the  legislature  next  year  to  work  for  the  putting 
upon  the  statute  books,  either  a  law  that  will  exempt  a  money 
demand — a  thing  which  has  no  tangible  existence  whatever,  but 
is  merely  evidence  of  what  has  passed  between  people,  written 
upon  a  piece  of  paper,  the  ink  and  all  of  which  has  not  cost 
one-twentieth  part  of  one  cent — a  law  that  will  exempt  money 
demands  altogether  from  assessment  and  taxation,  or  else  lower 
the  assessment  so  that  we  will  not  make  liars  and  criminals  of 
the  people  of  the  State  of  Indiana;  so  that  we  will  get  more 
revenue  from  that  source  than  we  get  now;  and  so  that  the  cir- 
culating medium  will  flow  more  freely  and  help  the  industries  of 
the  State  of  Indiana.  That  is  the  kind  of  law  we  need.  I  want 
to  thank  you  again  for  your  attention. 

DISCUSSION 

THE  CHAIRMAN  (Dr.  Rawles)  :  The  session  is  now  open  for 
general  discussion.  I  realize  that  the  time  is  short,  but  we  may 
have  some  interesting  speeches.  I  think  it  will  be  fair  to  limit 
these  to  five  minutes,  and  I  hope  no  one  will  feel  offended  if  I 
inform  him  when  his  time  is  up. 

Mr.  Isaac  K.  Parks,  of  Mishawaka,  has  asked  permission  to 
explain  a  proposition  which  he  would  like  to  lay  before  the  Asso- 
ciation. I  will  ask  Mr.  Parks  to  do  so.  He  has  promised  faith- 
fully that  he  will  not  take  more  than  five  minutes. 

MR.  ISAAC  PARKS  (of  Mishawaka)  :  Mr.  Chairman,  ladies,  arid 
gentlemen,  I  have  offered  to  the  Resolutions  Committee  a  proposi- 
tion which  I  will  read: 


TAXATION   IN   INDIANA  169 

Resolved,  That  this  conference  recommend  that  all  taxing  officials  in 
localities  where  franchises  have  been  granted  give  earnest  study  to  fran- 
chise values,  to  the  end  that  all  public  utility  franchises  be  placed  on  the 
tax-duplicate. 

We  recommend  that  the  Indiana  legislature  adopt  such  necessary  laws, 
or  amendments  to  existing  law,  effectually  to  tax  street  railway  franchises 
by  placing  such  franchises  on  the  tax-duplicate  as  a  separate  item. 

We  recommend  that  all  franchise  taxes  when  collected  shall  go  to  the 
locality  granting  the  franchise,  thus  recognizing  the  principle  of  home  rule 
and  local  self-government  in  taxation. 

I  don't  know  what  the  Resolutions  Committee  is  going  to  do 
in  regard  to  this  resolution,  whether  they  will  reject  it  in  toto, 
or  recommend  it  wholly  or  in  part.  I  have  not  a  proposition  like 
brother  Bachelder's,  which  is  like  the  darkey's  coon  trap  that 
will  "ketch  'em  goin'  or  comin'. "  Instead  of  that,  my  proposi- 
tion will  give  us  complete  exemption. 

Judge  Howard,  in  1891,  a  member  of  the  legislature,  wrote 
the  taxation  law,  and  in  that  act  he  provided  for  the  taxation 
of  street  railways,  water- works,  gas,  and  other  franchises  uniformly. 
The  only  county  in  this  State  that  is  taxing  franchises  today  is 
St.  Joseph  county.  In  1901,  ten  years  later,  a  street  railway 
company  procured  an  amendment  to  Judge  Howard's  law  which 
is  in  the  nature  of  a  "joker"  in  the  taxation  law,  whereby  all 
street  railways  are  lifted  from  the  realm  of  public  utilities  and 
placed  in  the  class  of  steam  railroads,  and  have  thereby  success- 
fully evaded  taxation.  Senator  Wolcott  yesterday  complained  of 
the  loss  of  five  millions  in  the  personal  schedules  in  this  State. 
I  will  tell  you  how  to  place  on  the  personal  schedules  in  this 
State  two  hundred  and  fifty  millions — assess  your  franchises. 
(Applause.) 

If  you  want  to  exempt  the  street  railways,  take  a  little  of  the 
assessment  off  their  rolling-stock,  so  that  they  will  put  on  better 
cars,  and  earn  enough  out  of  the  franchises  to  pay  off  this  taxa- 
tion. All  other  public  utilities  in  Indiana  are  supposed  to  be 
taxed ;  why  should  street  railways,  by  this  thimble-rigging  arrange- 
ment which  they  got  through  in  the  last  days  of  the  session  of 
the  legislature,  have  their  franchises  lifted  onto  the  beautiful 
island  of  Nowhere,  and  thus  escape  taxation  which  all  other 
public  utilities  should  have  to  pay?  Get  after  your  assessors. 
Compel  them  to  put  upon  the  tax-duplicate  every  gas  and  electric 
light  franchise  in  Indiana.  Change  the  law  as  is  proposed  by 
the  bill  which  I  offer  here,  and  which  I  will  not  read  but  ask  that 
it  be  printed  for  the  information  of  those  who  attend  this  con- 


170  INDIANA    UNIVERSITY 

ference.  Change  this  law  so  as  to  put  the  street  railways  in  the 
same  category  that  they  were  before  they  procured  the  passage 
of  the  "joker"  in  the  last  days  of  the  legislative  session  of  1901, 
and  you  will  put  upon  the  personal  list  of  the  tax-duplicate  of 
Indiana  a  quarter  of  a  billion  of  dollars,  for  the  franchises  of 
Indiana  are  worth  all  of  that  and  more.  We  will  add  one  million 
dollars  at  once  in  St.  Joseph  county.  We  will  add  three  hundred 
and  fifty  thousand  dollars  on  the  street  railway  system.  We  will 
add  five  hundred  thousand  dollars  on  the  gas  company,  and  we 
will  add  on  the  Southern  Indiana,  or  Northern  Indiana  &  Michigan 
Electric  Light  Company,  another  five  hundred  thousand.  We  are 
putting  it  on  the  electric  light  company  and  the  gas  company 
now,  and  they  are  kicking  because  they  see  the  street  railway, 
favored  by  legislative  enactment,  escaping ;  and  they  object  because 
the  street  railway  is  a  public  utility  just  as  they  are. 

So  I  hope  that  this  Resolutions  Committee  will  see  fit  to  adopt 
this  resolution,  at  least  to  the  extent  of  putting  the  franchises  of 
the  street  railways  upon  the  tax-duplicate  in  separate  items,  and 
thus  keep  them  from  dodging  taxes  upon  that  very  important  item 
of  taxation.  That  is  one  of  your  intangible  properties  that  is 
recorded,  and  that  cannot  escape,  and  it  should  be  taxed.  The 
law  plainly  says  so. 

The  following  is  the  bill  referred  to  by  Mr.  Parks : 

A  PROPOSED  BILL  EFFECTUALLY  TO  TAX  STREET  RAILWAY  FRANCHISES,  AND  TO 
APPLY  THE  PRINCIPLE  OF  HOME  RULE  AND  LOCAL  SELF-GOVERNMENT  TO 
THE  DISTRIBUTION  OF  SUCH  TAXES  WHEN  LEVIED  :  Proposed  by  Misha- 
waka  Chamber  of  Progress,  Mishawaka,  Indiana. 

An  Act  to  Amend  an  Act  Entitled  "An  Act  Supplemental  to  an  Act 
approved  March  6,  1891,  entitled  'An  Act  Concerning  Taxation,  Repeal- 
ing all  Laics  in  Conflict  Thereifrith,  and  Declaring  an  Emergency,'  ap- 
proved March  5,  1901"  and  Declaring  an  Emergency. 

Section  1.  Be  it  enacted  by  the  Assembly  of  the  State  of  Indiana,  that 
Section  1  of  an  Act  approved  March  5,  1901,  being  an  act  supplemental  to 
an  act  entitled  "An  Act  Concerning  Taxation"  and  approved  March  6, 1891, 
and  declaring  an  emergency  be  and  the  same  is  hereby  amended  to  read  as 
follows :  "Section  1.  That  the  word  'railroad'  wherever  it  occurs  in  an  act 
entitled  'An  Act  Concerning  Taxes,  Repealing  all  Laws  in  conflict  therewith 
and  Declaring  an  Emergency,'  approved  March  6,  1891,  shall  from  and 
after  the  taking  effect  of  this  act  be  considered  for  all  purposes  of  taxation 
as  including  every  kind  of  street  railroad,  suburban  railroad,  or  interurban 
railroad,  association,  or  company  or  corporation,  whether  its  lines  of  rail- 
road be  maintained  either  at  the  surface,  or  below  or  above  the  surface  of 
the  earth,  and  by  whatever  power  its  vehicles  are  transported ;  and  every 
person  or  persons,  association,  or  corporation  operating  such  street, 


TAXATION   IN    INDIANA  171 

suburban,  or  interurban  road,  shall  make  returns  for  taxation  upon  all 
such  property  in  the  same  manner  that  returns  are  made  upon  other  rail- 
road property  and  upon  similar  blanks,  and  taxes  shall  be  levied,  assessed, 
and  collected  upon  such  street,  suburban,  or  interurban  railroad  property 
in  the  same  manner  as  taxes  are  now  or  hereafter  may  be  levied,  assessed, 
and  collected  upon  other  railroad  property :  provided,  however,  that  in  de- 
termining the  value  of  such  street,  suburban,  or  inWurban  road  for  taxa- 
tion purposes,  the  value  of  any  and  all  permits,  privileges,  and  franchises 
held  by  any  person  or  persons,  association,  or  corporation  operating  such 
street,  suburban,  or  interurban  railroad,  shall  be  separately  designated  in 
such  tax  returns,  and  such  franchise  value  shall  be  determined  and  assessed 
as  already  provided  by  law  for  the  assessment  of  franchises,  privileges, 
and  permits,  and  the  taxes  levied  upon  such  permit,  privilege,  or  franchise 
valuation  shall  be  distributed  to  the  municipality,  or  township  or  county 
granting  such  franchise,  permit,  or  privilege." 

Section  2.  That  all  laws  in  conflict  with  the  provisions  of  this  statute 
are  hereby  repealed. 

Section  3.  That  every  person  or  persons,  association,  or  corporation 
owning  any  street,  suburban,  or  interurban  railroad  as  above  described 
operating  in  the  State  of  Indiana  shall  by  such  person  or  persons  or  such 
association,  president,  or  other  proper  accounting  officers  between  the  first 
of  March  and  the  15th  day  of  May  of  the  current  year,  in  addition  to  the 
other  property  required  to  be  listed  under  the  taxing  laws  of  the  State  of 
Indiana,  make  out  and  deliver  to  the  assessor  a  sworn  statement  of  the 
amount  of  its  capital  stock,  setting  forth  particularly  in  addition  to  all 
the  items  heretofore  particularly  required  by  Section  73  of  the  Taxation 
Act  approved  and  in  force  March  6,  1891,  the  following  item,  to  wit:  Item 
8.  The  name  and  value  of  each  franchise  or  privilege  or  permit  owned 
or  enjoyed  by  such  person  or  persons,  corporation,  or  association,  together 
with  the  date  of  such  franchise  and  the  date  of  its  expiration. 

Section  4.  Whereas,  an  emergency  exists  for  the  immediate  taking 
effect  of  this  act,  the  same  shall  be  in  full  force  and  effect  from  and  after 
its  passage. 

STATEMENT 

The  Legislature  of  1891  provides  a  system  of  taxing,  in  a  bill  drawn 
by  Judge  Timothy  E.  Howard,  of  South  Bend  (then  a  member  of  the 
State  Senate),  which  provided  for  the  taxation  of  street  railways,  water- 
works, gas,  and  other  franchises  uniformly.  ( See  Burns'  Rev.  Stats.  1914, 
§§10167-74-232-34.) 

In  the  latter  days  of  the  legislature  ten  years  later,  the  street  rail- 
way interests  procured  an  amendment  to  Judge  Howard's  law.  See  Bums' 
Rev.  Stats.  1914,  §10249,  which  is  in  the  nature  of  a  "joker"  in  the  taxation 
law,  whereby  all  street  railways  are  lifted  from  the  realm  of  public 
utilities,  and  placed  in  the  class  of  steam  railroads,  and  whereby  they  be- 
came subject  to  taxation  after  the  manner  of  steam  railroads. 

The  former  law  provided  for  the  separate  listing  of  the  value  of 
franchises  and  for  distributing  such  tax  to  the  community  that  granted 
same.  The  "joker"  does  not  provide  for  the  specific  taxing  of  franchises 
as  a  separate  item,  thus  enabling  the  street  railroads  to  dodge  paying  taxes 


172  INDIANA    UNIVEESITY 

on  franchises.  Even  though  such  taxes  were  levied,  the  Railway  Taxation 
Act  prevents  the  return  of  the  taxes  to  the  community  granting  the  fran- 
chise, but  seeks  to  distribute  all  the  taxes  of  the  railway  over  the  entire 
system,  prorated  on  the  mileage  basis  of  the  system. 

EXAMPLE 

Mishawaka  and  South  Bend  have  granted  valuable  franchises  to  a 
street  railway  company.  To  date  they  have  not  paid  a  single  cent  in  taxes 
on  such  franchises.  If  they  were  to  pay  a  franchise  tax  under  the  present 
law,  Mishawaka  and  South  Bend  would  receive  but  a  small  rate  on  such 
tax  for  the  reason  that  the  tax  would  be  equally  distributed  over  every 
mile  of  the  Murdock  System  (the  owner  of  the  local  street  railways), 
running  from  Michigan  City  to  Indianapolis. 

This  is  the  decision  of  the  State  Board  of  Tax  Commissioners  made 
in  a  test  case  brought  before  them  by  the  cities  of  Mishawaka  and  South 
Bend,  such  decision  being  rendered  July  23,  1914.  This  overthrows  the 
principle  of  local  self-government  and  home  rule  in  taxation  and  the  bene- 
fits derived  from  taxation. 

Signed,  ELI  F.  SEEBIBT,  City  Attorney  of  South  Bend. 

RALPH  H.  JERNEGAN,  City  Attorney  of  Mishawaka. 
ISAAC  KANE  PARKS,  Former  City  Attorney,  Mishawaka. 
CHARLES  W.  BINGHAM, 
October  28, 1914.  Attorney  for  Mishawaka  Chamber  of  Progress. 

MR.  W.  K.  STEWART  (of  Indianapolis)  :  Mr.  Chairman,  Dr.  J. 
N.  Hurty  has  written  me  a  letter  in  which  he  asked  me  to  present 
a  statement  entitled  "Lowering  Taxes"  to  the  conference.  Dr. 
Hurty  is  out  of  the  city.  The  statement  is  as  follows : 

LOWERING  TAXES 

Fifty  per  cent  of  all  taxes  is  consumed  in  supporting  the  defectives, 
the  delinquents,  and  the  dependents. 

Seventy  per  cent  of  defectiveness,  delinquency,  and  dependency  is 
caused  by  sickness  and  disease. 

Hygiene  knows  how  to  prevent  sickness  and  disease. 

Let  us  invoke  Hygiene  and  let  her  lower  taxes,  and  at  the  same  time 
make  the  nation  fifty  per  cent  more  efficient. 

Quit  lopping  off  the  branches  of  evil.  They  grow  again  all  the 
stronger.  Lay  the  ax  at  the  root  of  troubles. 

THE  CHAIRMAN  (Dr.  Rawles)  :  I  see  in  the  audience  Mr.  Aaron 
Jones,  of  South  Bend.  I  believe  that  the  members  of  this  confer- 
ence would  be  glad  to  have  a  few  words  from  Mr.  Jones. 

MR.  AARON  JONES:  Mr.  Chairman,  gentlemen  of  the  conven- 
tion, I  came  here  as  a  student,  to  learn.  I  am  a  little  old  for  that, 
but  still  I  am  in  the  business.  It  was  not  my  purpose,  and  is  not 
now  my  purpose,  to  make  any  statement.  I  will  say,  however,  that 


TAXATION    IN    INDIANA  173 

I  1m, ve  been  delighted  at  the  range  of  thought  in  this  con  Terence;, 
;in<l  at  the  variety  of  information  that  has  been  brought  to  this 
subject,  and  to  these  great  questions  relating  to  the  fundamental 
principles  of  government  that  have  been  presented  by  the  various 
gentlemen  who  have  read  papers  to  this  convention. 

I  realize  that  any  change  that  looks  toward  fairness  and  equali- 
zation of  taxation,  of  the  burdens  and  expense  of  government, 
should  be  strongly  urged,  and  it  should  be  urged  by  every  loyal  citi- 
zen upon  the  grounds  of  equity  and  justice  to  all  classes  of  citizens. 
I  do  not  believe  that  justice,  equity,  and  fairness  can  be  reached 
unless  we  have  before  us  the  whole  range  of  thought  about  these 
questions.  In  order  to  approach  these  questions  in  a  spirit  of  fair- 
ness and  justice  careful  thought  is  necessary.  I  have  not  time  to 
say  any  more.  I  want  to  take  the  train  in  ten  minutes,  and  I  do 
not  desire  to  make  any  further  remarks. 

MR.  CHARLES  P.  DONEY  (of  Indianapolis)  :  Mr.  Chairman  and 
gentlemen,  I  am  one  of  the  representatives  here  of  the  Indianapolis 
Real  Estate  Board.  I  want  to  take  just  a  minute  to  express  my 
gratification  for  the  opportunity  to  hear  the  papers  that  have  been 
presented  to  us  during  the  last  two  days.  I,  of  course,  have  listened 
to  these  papers  primarily  from  the  standpoint  of  a  real  estate  man, 
because  we  real  estate  people  feel  very  keenly  indeed  the  injustice 
that  is  done  to  the  great  mass  of  people  by  the  wrong  method  of 
taxation.  I  do  not  believe  that  there  is  any  one  that  has  been  here 
during  these  two  days  and  has  heard  these  papers  who  will  not 
agree  that  great  injustice  is  being  done  to  the  real  estate  owner. 
We  realize  further  that  this  injustice  is  accumulative.  It  is  not  at 
a  standstill.  It  has  been  growing  from  year  to  year,  and  the  worst 
of  it  is  that  the  prospect,  the  outlook,  is  exceedingly  gloomy. 

I  listened  very  intently  to  the  paper  that  was  read  to  us  by 
Senator  Wolcott ;  and,  if  you  will  remember,  the  main  point  of  that 
paper  rested  upon  the  fact,  as  he  told  you,  that  the  personal  proper- 
ty of  the  State  of  Indiana,  instead  of  increasing — when  we  un- 
doubtedly know  the  wealth  of  the  State  is  increasing — has  de- 
creased within  the  last  four  years  over  five  million  dollars.  On  the 
other  hand,  the  assessment  of  real  estate  has  been  increased  one 
hundred  and  seventy  million  dollars.  Now,  we  know  what  will  be 
the  legitimate  result  of  that.  We  have  the  explanation  for  the  in- 
creasing tax-rate.  He  has  shown  us  that  this  decrease  in  personal 
property  has  been  going  on  for  the  last  twelve  years.  There  is 
every  indication  that  it  will  continue  to  go  on.  So  that  it  is  in- 


174  INDIANA   UNIVERSITY 

evitable  under  existing  circumstances  that  our  tax-rate  is  going  to 
increase  upon  real  estate ;  and  that  means,  in  the  last  analysis,  that 
the  man  who  owns  the  small  home  is  going  to  have  an  additional 
burden  laid  upon  him.  That,  we  believe,  is  unjust. 

Now,  the  thing  that  discourages  me  in  this  discussion  is  the  ap- 
parent notion  that  real  estate  must  continue  to  bear  the  larger  part 
of  the  burden  of  taxation.  There  is  a  manifest  disposition  here  to 
fix  a  rate  limit  of  taxation  for  personal  property,  but  not  a  word, 
aside  from  Mr.  Potts '  paper,  have  I  heard  stated  here  that  proposed 
or  looked  towards  the  limitation  of  the  rate  upon  real  estate.  I 
see  no  reason  whatever  why  there  should  not  be  placed  upon  the 
statute  books  a  law  fixing  a  limit  upon  the  taxation  of  real  estate. 
We. need  not  be  alarmed  about  putting  the  limit  at  one  per  cent. 
We  are  willing,  as  real  estate  owners,  to  allow  you  personal  prop- 
erty people  to  escape  with  one-half  of  that.  If  the  listing  of  per- 
sonal property  is  going  to  disturb  you  too  much,  we  will  be  gen- 
erous and  offer  to  bear  twice  the  burden  you  do.  We  will  fix 
the  rate  on  real  estate  at  one  per  cent,  and  then  fix  your  rate 
at  one-half  of  one  per  cent.  Some  one  may  urge  that  we  will 
not  get  by  means  of  that  rate  abundant  revenue.  Mr.  Potts  has 
shown  you  that  there  are  other  ways  of  raising  revenue  that  are 
equally  as  just  as  these  that  we  have  been  resorting  to  in  the  past, 
so  we  need  have  no  fear  that  we  will  get  into  financial  trouble  by 
fixing  a  limit  to  the  tax-rate  on  real  estate. 

MRS.  KATE  WOOD  RAY  (of  Gary,  Indiana) :  Mr.  Chairman  and 
gentlemen,  I  realize  that  I  am  but  a  novice  before  this  body,  but  I 
ask  you  to  hear  me  for  my  cause,  and  bear  with  me.  In  the  fact 
that  this  conference  has  been  willing  to  extend  the  courtesy  of  the 
floor  to  women  I  think  there  is  peculiar  significance,  for  by  doing 
so  you  have  said,  that  taxation  without  representation  is  just  as 
unjust  today  as  it  was  in  the  days  of  our  forefathers.  (Applause.) 
I  hope  that  your  recognition  of  us  is  prophetic  of  what  you  expect 
to  do  by  us,  though  I  believe  that  the  gentleman  present  here  today 
who  is  the  father  of  this  very  progressive  amendment  to  your  con- 
stitution which  will  regulate  the  taxing  system  of  Indiana  is  also 
the  author  of  a  very  reactionary  amendment  which  would  limit  the 
elective  franchise  to  males  only.  I  hope  that  before  the  next  ses- 
sion of  the  legislature  he  will  be  unwilling  to  father  his  own  amend- 
ment. (Applause.)  I  thank  you  very  much  that  you  men  of  In- 
diana have  undergone  a  process  of  regeneration  in  thought  suffi- 
cient for  you  to  admit  a  woman  to  the  floor  of  this  convention. 


TAXATION    IN    INDIANA  175 

MR.  ANTHONY  DEAHL  (of  Goshen,  Ind.)  :  Mr.  Chairman,  it 
seems  to  me  that  we  all  agree  upon  the  proposition  that  there  is 
something  wrong  with  our  system.  The  question  is  as  to  the 
remedy.  It  would  seem  to  me  from  the  discussion  we  have  had, 
and  also  from  what  the  gentleman  has  said  upon  the  constitutional 
question,  that  a  bill  ought  to  be  prepared  to  go  before  the  coming 
legislature,  bringing  before  the  legislature  the  ideals  expressed  here. 
Then  we  ought  to  proceed  along  the  line  of  a  constitutional  amend- 
ment, so  that  if  the  Supreme  Court  should  hold  this  law  unconstitu- 
tional, we  should  have  the  constitutional  amendment  to  fall  back 
upon.  But  I  think  this  body  should  take  some  action  in  regard  to 
bringing  such  a  bill  before  the  legislature. 

THE  CHAIRMAN  (Dr.  Rawles)  :  The  Resolutions  Committee 
may  have  something  to  say  on  this  subject. 

MR.  E.  I.  LEWIS  (of  Indianapolis)  :  Mr.  Chairman,  I  see  a 
great  many  of  these  conventions  come  to  five  o  'clock  in  the  evening 
of  the  last  day  with  the  most  important  work  not  done,  and  mem- 
bers are  forced  to  leave  the  hall  on  account  of  the  necessity  of  going 
to  their  trains.  I  therefore  move  that  we  hear  the  report  of  the 
Resolutions  Committee  at  this  time,  and  that  after  that  opportunity 
be  given  any  one  who  desires  to  address  the  conference.  [The  mo- 
tion being  seconded  was  carried.] 

MR.  L.  S.  BOWMAN  (of  Richmond)  :  Mr.  Chairman,  we,  your 
Committee  on  Resolutions,  respectfully  submit  the  following  reso- 
lution : 

Resolved,  That  the  Executive  Committee  of  the  Indiana  State  Tax 
Association  be  and  is  hereby  requested  to  appoint  a  committee,  represent- 
ing all  classes  of  property  in  the  State  of  Indiana  subject  to  taxation, 
with  a  view  to  evolving  a  system  of  taxation  that  will  be  just  and  equitable 
to  all  the  taxable  interests  of  the  State. 

The  report  is  signed  by  L.  8.  Bowman,  J.  B.  Stoll,  Aaron  Jones, 
James  A.  Houck,  and  Fred  A.  Sims,  the  Committee.  I  move  the 
adoption  of  the  report.  [The  motion  being  seconded  was  carried.] 

MR.  EBEN  H.  WOLCOTT:  Mr.  Chairman,  I  believe  it  would  be 
very  fitting,  before  we  adjourn,  to  have  this  conference  give  an  ex- 
pression of  approval  of  the  important  and  unselfish  work  done  by 
the.  gentlemen  who  have  had  this  matter  in  charge.  I  know  myself 
that  Mr.  Lewis,  of  the  Indianapolis  News,  has  devoted  a  great  deal 
of  time  and  effort  towards  securing  the  results  that  have  been  at- 


176  INDIANA    UNIVEESITY 

tained.  I  also  know  that  Mr.  Sims  has  devoted  a  great  deal  of  time 
toward  making  this  conference  a  success;  and,  while  we  feel  that 
these  conferences  cannot  go  on  without  money,  yet  we  know  that 
we  not  only  need  money,  but  we  also  need  the  unselfish  work  which 
these  people  have  given  us.  It  is  purely  unselfish,  for  they  are 
working  simply  for  the  good  of  the  State,  and  for  the  purpose  of 
securing  a  good  tax  law  and  we  ought  to  show  that  we  appreciate 
it.  I  therefore  offer  the  following  resolution  and  move  its  adoption : 

That  the  delegates  to  this  convention  extend  to  the  officers  of  the  In- 
diana State  Tax  Association  their  sincere  thanks  for  their  earnest  and 
unselfish  efforts  in  making  this  movement  a  success,  and  especially  to  Mr. 
E.  I.  Lewis  of  the  News  whose  valuable  assistance  and  publicity  were  of 
such  material  aid,  and  to  Mr.  Fred  Sims  to  whose  earnest  and  untiring 
efforts  the  success  of  this  convention  is  largely  due. 

-This  was  adopted  by  a  rising  vote  of  thanks.  Whereupon  the 
conference  adjourned,  sine  die. 


APPENDIX  A 


List  of  Persons  Attending  the  Second  Conference  on 

Taxation 


Name. 

W.  A.  Alexander.  . 
Calvin  H.  Allen. . 


B.  W.  Anderson. 


K.  M.  Andrew.  .... 
Samuel  R.  Artman. 
Chas.  A.  Ashpaugh. 
M.  M.  Bachelder. . . 
U.  G.  Baker.  . 


Emerson  E.  Ballard. 
James  O.  Batchelor . 
F.  G.  Bates 

Chas.  P.  Beard 

J.  M.  Berauer. . 


Appointed 
Occupation.  Delegate  by 

Farmer 

Real  estate  and  Cent.  Elec.  Ry. 
tax  agt.,  Union    Assn. 
Trac.  Co.  of  Ind. 

Banker Business  Men's 

Assn. 

Cashier  of  bank 

Lawyer Governor 

Grain  dealer.  .  .  .  Ind. Grain  Assn 

Lawyer 

Glass  mfr 

Law  book  editor 

Mayor 

Prof,  of  Econom- 

ics,  Ind.  Univ. 

County  auditor.  Mayor. 

Physician 


Addrexs. 
Rushville. 
Anderson. 


Plainfield. 

Laporte. 
Lebanon. 
Frankfort. 
Indianapolis. 
Indianapolis, 
2050  N.  Meridian. 
Crawfordsville. 
Marion. 
Bloomington. 

Evansville. 
Indianapolis, 
1355  Madison  Ave. 


James  E.  Berry  
John  C.  Billheimer.  . 

Geo  A.  Bittler  
M.  D.  Boulden 

.  .  Assessor  
.  .  Pres.    Sterling  " 
Fire  Ins.  Co. 
.  .   State    Treasurer  
(elect). 

Indianapolis. 
Indianapolis. 

Ft.  Wayne. 
Kirklin. 

L  S  Bowman 

Auditor  \Vayne 

Richmond 

L  C  Boyd 

county. 

Indianapolis, 

Romulus  Boyd  
J.  W.  Brendel  

kcott  R.  Brewer  
Wm  A  Bridges 

.  .  Grain  dealer  
.  .  Farmer  and           Chester  White 
banker.                   Record  Assn. 
.  Sec.   Ind.   Real  
Estate  Assn. 
Farmer 

1437  Central 
Russellville. 
Zionsville. 

Indianapolis. 
Franklin. 

T.  D.  Brookshire 

Farmer                   Governor  

Roachdale. 

John  R.  Browne... 

.  Lawver..             .   Governor.. 

Marion. 

Avc. 


12-2902 


(177) 


178 


INDIANA    UNIVERSITY 


Name. 

Geo.  C.  Bryant 

D.  A.  Bryson 

Henry  W.  Bullock... . 

Wm.  Cain 

Albert  N.  Chamness. 
D.  M.  Clark 

E.J.Clark 

R.H.Clark 

J.  H.  Claypool 

J.  Arthur  Connors. . . . 

Cook.. 


Occupation. 

Field  Agt.  Dept. 

of  Agric. 

Lumber  merch't. 

Lawyer 


Appointed 
Delegate  by 


Farmer 

Co.  Treasurer. . 
Auditor  Boone 
county. 

Farmer 

Real  estate .... 

Farmer 

Clerk.. 


Mayor. 


M.  L.  Corey.. 


E.  L.  Cothrell 

Wm.  N.  Cox 

Will  H.  Craig 

J.  M.  Cravens 

Wm.  M.  Crockett . . . 

Jas.  S.  Cruse 

F.  C.  Cutter 

W.  L.  Day 


Anthony  Deahl . 
Paul  DeKress..  . 
H.  G.  Deupree. . 
Chas.  P.  Doney. 


Asst.  Tax  Agent, 

C.  &E.  I.  R.  R. 
Sec.  Ind.  Retail 

Hdw.  Assn. 

Real  estate 

Assessor 

Editor 

Farmer 

City  controller, 

lawyer. 

Real  estate Indpls.    Real 

Estate  Assn. 
Lawyer 


J.  P.  Dunn., 

J.  Walter  Dunn 

Winfield  T.  Durbin. . 
Andrew  E.  Durham . 


Edward  C.  Eikman.. 
Geo.  B.  Elliott 

FredFeick.. 


Real  estate          

broker. 

Lawyer 

Assessor 

Real  estate 

Real  estate Indpls.  Real 

Estate  Board. 

City  controller. .  Mayor  Bell .  . . 
School  vvoi'k.  . 


Manufacturer        Mayor 

and  banker. 
Lawyer,  member 

Gen.  Assem., 

1915. 

Lawyer 

Stock  and  bond  Indpls.  Stock 

dealer.                    Exchange. 
Lawyer,  member 

Gen.  Assembly, 

1915. 


Address. 
Washington,   D.   C. 

Montpelier. 
Indianapolis, 
807  Fletcher. 
Lebanon. 
Richmond. 
Lebanon. 

Shelbyville. 
Muncie. 
Indianapolis. 
Indianapolis, 
201  Wash.  PL 
Chicago,  111. 

Argos. 

Indianapolis. 

Bloomingdale. 

Noblesville. 

Madison. 

LaFayette. 

Indianapolis, 

112  E.  Market  St. 
Indianapolis, 

1210  N.  Illinois  St. 
Anderson. 

Goshen. 
Evans  ville. 
Indianapolis. 
Indianapolis, 

3345  Broadway. 
Indianapolis. 
Indianapolis, 

124  S.  Emerson  Av. 
Anderson. 

Greencastle. 


New  Palestine. 
Indianapolis, 
3816  Wash.    Blvd. 
Garrett. 


TAXATION    IN    INDIANA 


179 


Name., 
H  E  Fieber 

Occupation. 

Appointed 
Delegate  by 
Indpls.   Real 

Address. 
Indianapolis 

James  R.  Fleming.  .  .  . 

Geo.  B.  Forgy  

Hiram  Foster  
Samuel  M  Foster 

.  Lawyer,  member 
Gen.  Assembly, 
1915. 
.   Investment 
banker. 
.   Farmer  
Banker  and  mfr 

Estate  Assn. 

Commercial 
Club. 
Jefferson  Co.  .  . 
Governor 

Portland. 

Logansport. 

Deputy. 
Ft  Wayne 

WillM.  Frazee  
Mrs   Alice  M   French 

.   I.  &  C.  Trac.  Co. 
Farmer 

Cent.  Elec.  Ry. 
Assn. 

Rushville. 
Indianapolis 

Wm.  S.  Garber  
Hannah  M.  Graham.  . 

.   Shorthand   re- 
porter. 
.   Physician  

Indianapolis, 
1504  N.  Penn.  St. 
Indianapolis, 

A  J  Hamrick 

Clerk    Circuit 

2233  N.  Meridian. 
Greencastle 

W.  F  Handy 

court,  banker. 
Accountant 

Indianapolis 

John  W.  Haney 

Assessor       .    . 

3118  Central  Ave. 
Logansport 

Thomas  P.  Harvey.  .  . 

Lawyer  

Indianapolis, 

J.  E.  Hawkins 

4167   Wash.    Blvd. 
Sharps  ville 

Frank  T.  Hawley  

Wm.  I.  Haymond  
Joseph  Heavilen  

Henry  B.  Heller  
A.  C.  Helm  

John  Oscar  Henderson 

Lawyer  
Lawyer  

County  attorney 
Druggist  

Retired 

Commer.  Club. 
Clinton  County 
Fair  Assn. 
Adams  County. 
Fed.    Parents- 
Teachers'  Club, 
Muncie    and 
Delaware  Cos. 

Indianapolis, 
620  E.  21st  St. 
Muncie. 
Frankfort. 

Decatur. 
Muncie. 

Indianapolis 

Wm.  P.  Henley 

Banker  

Carthage. 

Horace  H.  Herr 

Editor        

Indianapolis. 

O  W  Hewett 

Indianapolis 

R.  A.  Hicks 

Banker              .  . 

1934  College  Ave. 
Cambridge  City 

G.  B.  Hill 

Tax  agent,  C.  &. 

Chicago,  111. 

C.  M.  Hobbs  
Wm.  J.  Hogan  
JohnH.  Holliday  

E.  I.  R.  R. 

Nurseryman.  .  .  . 

Pres.  Ind.  State. 
Cham,  of  Com. 
Banker  

State  Horticul- 
tural Society. 

Ind.  Chamber 
of  Commerce. 

Plainfield. 

Indianapolis, 
3157  N.  Delaware. 
Indianapolis. 

180 


INDIANA    UNIVERSITY 


Appointed 


\ai»<\ 

Occupation,             f)elc</ale  hi/ 

Addreu. 

Levi  H.  Holloway.  .  .  . 

.   Twp.  trustee.  .  .  .   Twp.  trustees.  . 

Albany,  R.  R.  2. 

John  B.  Holton  

.  Real  estate  and  

Indianapolis. 

loans. 

James  A.  Houck  

.   State  Tax  Com-  

Indianapolis, 

missioner. 

141  6  N.  New  Jersey 

H.  D.  Howe  

.  Lawyer  

LaGrange,  111.. 

130  8th  Ave. 

John  T.  Hume  

.   Lawyer  Town    of    Dan- 

Danville. 

ville. 

H.  S.  Irwin  

Farmer 

Frankfort. 

E   S  Jaqua 

Lawyer                                 » 

Winchester. 

Henry  E.  Jewell  

Mayor  

New  Albany. 

W.  R.  Jinnett  

.  Member,  1915       

Manilla. 

Legislature. 

Fred  B.  Johnson  

.   Lawyer  ,  

Indianapolis. 

Graf  ton  Johnson  

.  Canned   goods     :  

Greenwood. 

packer. 

J.  H.  Johnson  

.   Deputy   county   

Ft.  Wayne. 

auditor. 

R.  O.  Johnson  

.   Mayor  

Gary. 

Will  Johnson  

.   County  auditor    Mayor  

Ft.  Wayne. 

(elect). 

Mrs.  W.  S.  Johnson... 

.  Housekeeper  

Indianapolis, 

Woodruff  Place. 

Aaron  Jones  

.   Farmer  

South  Bend, 

115  S.  Scott, 

J.  U.  Jones  

.   Farmer  Hendricks  Co.  . 

Clayton. 

Pearl  F.  Keever  

.  Assessor  

Winchester. 

Ernest  R.  Keith  

.  Lawyer  ,  

Indianapolis, 

1024  Law  Bldg. 

John  P.  Kemp  

Lawyer 

Tipton. 

C.  A.  Kenyon  

.   Lawyer  

Indianapolis. 

H.  H.  Kroh  

Indianapolis. 

William  B.  LaBaw.  .. 

Veedersburg. 

John  A.  Lapp  

.   Director,  Legis  

Indianapolis. 

lief.  Bureau. 

Carl  Lauenstein  

.   County  and  city  Mayor.  ....... 

Evansville. 

treasurer. 

Sam  Leeper  

.   Banker  

South  Bend. 

Fred  H.  Lemon  

.   Florist  Commer.  Club  . 

Richmond. 

H.  W.  Leonard  

Indianapolis, 

2002  Ruckle  St. 

J.  L.  Leonard  

.   Professor,  Eco-    Wabash  College 

(  TMwfordsville. 

nomics. 

E.  I.  Lewis  

.   Newspaper  man  

Indianapolis. 

Harlow  Lindley  

.   Prof,  history  and  Earlham  Col- 

Richmond. 

polit.  science.         lege. 

Dan  M.  Link  

State  Tax  Com-  :  .'  

Auburn. 

missioner. 

TAXATION    IN   INDIANA 


181 


Name. 
H.  E.  Lochry         

Occupation.             Delegate  l>y 
Farmer  

.   Franklin. 

A.  N.  Logan  

.  Teacher,  County  

.   Brookville. 

Robert  W.  McBride.  . 

John  McCardle  
J  Y.  W.  McClellan  . 

assessor  (elect). 
.  Lawyer  
% 
.  Grain  dealer  
Mayor     ...                   .... 

.   Indianapolis, 
1434  Park  Ave. 
.   Indianapolis. 
.   Auburn.    • 

J  C  McCloskey 

Inheritance  tax 

Indianapolis 

J  H  McGill 

appraiser. 
Manufacturer 

Valparaiso 

Wm.  D.  McKenzie.  .  . 

.   Lawyer  

.   Chicago,  111., 

Uz  McMurtrie 

Mrs.  F.  T.  McWhirter 

L.  E.  Maddox 

G.  W.  Manlove 

W.  P.  Manion "  .  . 

Parks  M.  Martin 

Theodore  T.  Martin. . 
Earl  C:  Mendenhall .  .  . 

James  Metsker 

Adolph  J.  Meyer 

Winfield  Miller 

Mrs.  W.  E.  Miller 

John  W.  Minor 

Victor  D.  Mock 

A.  E.  Mogle , 

Thomas  F.  Moran 

J.  Edward  Morris 

J.  C.  Morrison .  . 


James  W.  Morrison 
Carl  Henry  Mote . . . 

Cyrus  W.Neal 

T.  C.  Neal.. 


County  treas. 
Housewife .  . 


Farmer. . 
Farmer.  . 

Assessor. 


Indiana  Feder- 
ation of  Clubs. 


Tax  agent  N.  Y 

Central  Lines. 
County  Supt.  .  .  .   Commer.  Club 

Assessor Mayor 

Assessor Co.  Commrs . . 

Insurance   and     

real  estate. 
Pres.  Nat.  Trust 

and  Sav.  Co. 
Sec.,  Commis.  on 

Work.  Women. 
Manufacturer.  . 


Co.  Commrs . 

Prof .  history  and  Purdue  Univ. 
economics. 

Real  estate 

Lawyer 


Industrial  Assn. 
and  Taxpayers 
League. 


Lawyer 

Newspaper 

Life  ins.  agent. 
Mayor 


208  S.  LaSalle  St. 
Marion. 
Indianapolis, 
2330  College    Ave. 
Montpelier. 
Carmel. 
Indianapolis, 

629  N.  Illinois  St. 
Indianapolis. 

Danville. 
Winchester. 
Williamsport. 
Indianapolis, 
136  E.  Market  St. 
Indianapolis. 

South  Bend. 

Indianapolis, 
W.  Market  St. 
Warsaw. 
Terre  Haute. 
LaFayette. 

Indianapolis. 
Frankfort. 


Frankfort, 

902  N.  Main  St. 
Indianapolis, 

506  Am.  Central 

Life  Bldg. 
Indianapolis, 

137  W.  29th  St. 
Montpelier. 


182 


INDIANA    UNIVERSITY 


Name. 
Mason  J.  Niblack. 


W.  G.  Oliver 

William  E.  O'Neill. 
Hence  Orme .  . 


Occupation. 
Farmer,  member 

Gen.  Assembly, 

1915. 

Lawyer 

Assessor 

Farmer 


Appointed 
Delegate  by 


Thomas  B.  Orr Lawyer. .  . . 


Herriott  Clare  Palmer. 

Isaac  Kane  Parks 

Ralph  Payne 

Edgar  A.  Perkins 

A.  G.  Pheasant.  . 


Prof,  history  and 
polit.  science. 

Lawyer 

Banker 

Chief,  State  Bu- 
reau of  Inspec. 

Lawyer 


Marion  County 
Hort.  Soc. 

State  League  of 
Bldg.  and  Loan 
Associations. 

Franklin  Col- 
lege. 

Mayor 


Douglas  Pierce Lawyer. 


Oscar  L.  Pond 

J.  W.  Putnam 

Geo.  M.  Raab 

John  W.  Ragsdale..  .. 
Oren  M.  Ragsdale. . . . 


B.  M.  Ralston 

Samuel  M.  Ralston. . . 

J.  L.  Randel 

Mrs.  Kate  Wood  Ray 


Lawyer 

Professor  of  Eco-  Butler  College 

nomics. 
County  clerk       

(elect). 

Farmer 

Dealer  in  invest- 

ment  securities. 


Governor .... 
Banker .  . 


Charles  F.  Remy Lawyer. 


Indiana  Equal 
Suffrage  Assn. 


Address. 
Vincennes. 


Franklin. 

Muncie. 

Greenwood. 

Anderson. 


Franklin. 

Mishawaka. 

Rushville. 

Indianapolis, 

337   Downey  Ave. 
Indianapolis, 

200  Indiana  Trust 

Building. 
Indianapolis, 

200  Indiana  Trust 

Building. 
Indianapolis, 

3715  Central  Ave. 
Indianapolis. 

Mishawaka. 

Franklin. 

Indianapolis, 
703   Fletcher  Sav- 
ings Co. 

Indianapolis. 

Indianapolis, 
2102  N.  Delaware. 

Greencastle. 

Gary. 


A.  G.  Richards 

Ralph  E.  Richman .  . . 

Chas.  B.  Riley 

T.  H.  Ristine 

William  Robinson. .  .  . 
A.  J.  Rogers 


Real  estate 

Sec.  State  Fire 

Marshal. 
Sec.  Ind.  Grain 

Dealers'  Assn. 

Lawyer 

Lawyer 

Insurance  agent 


Mayor. 


....   Indianapolis, 

1603  Park  Ave. 
....   Evansville. 

Indianapolis. 

3764  Ruckle  St. 

Indianapolis, 

615 Board  of  Tnulr. 

Crawfordsville. 

Mayor Frankfort. 

Indianapolis, 

319  E.  Market  St. 


TAXATION    IN    INDIANA 


183 


Name. 
W  W  Rose 

Occupation. 
Farmer  

Appointed 
Delegate  by 

Address. 
Rossville. 

Sam  F.  Row  
John  L.  Rupe  
John  A   Russell 

.  Grain  dealer  
.   Lawyer  
Treas.  Michigan 

State  Bar  Assn. 

Jonesville. 
Richmond. 
Detroit,  Mich. 

Wright  W.  Russell.  .  . 
Larry  Ryan    

State  Tax  Assn. 
.  Student  

,  County  treasurer 

Representing 
Evening  Item. 

Richmond. 
Kokomo. 

Michael  J.  Shea  
A  J  Shields 

.  Manufacturer.  .  . 
Solicitor 

Indianapolis, 
1244  Naomi  St. 
Bloomfield 

R.  M.Shirley  
George  Shirls 

.  County  assessor. 

Trustee  

Danville. 
Indianapolis 

Fred  A  Sims 

Investment 

Frankfort. 

John  C  Smith 

banker. 
Grocer    (whole- 

Indianapolis, 

j  L  Smith 

sale). 
Insurance  agent 

2351  College  Ave. 
Winchester 

Geo.  F.  Snyder  

.   Salesman  

Indianapolis, 

Marcus  S.  Sonntag.  .  . 

Fletcher  Sav.  & 
Trust  Co. 
.   Pres.  American 

R.  R.  4,  Box  98. 
Evansville. 

F  H  Spann 

Trust  and  Sav. 
Bank. 
Real  estate 

Indianapolis. 

Charles  Starr  

Indianapolis, 

W  K  Stewart 

Merchant 

3556   Wash.    Blvd. 
Indianapolis 

Frank  T.  Stockton  .  .  . 
E  B.  Stotsenburg.  . 

.  Asst.  Prof,  polit- 
ical economy. 
Lawyer      

Ind.  Univ.  .  . 

Bloomington. 
New  Albany. 

Geo  W  Stout 

Editor 

Indianapolis 

U.  C.  Stover  

.  Lawyer  

Indianapolis. 

Frank  H.  Streightoff. 
E  W  Stucky 

.   Prof,  of  Econom. 
Druggist 

DePauw  Univ.  . 
State  Pharma- 

Greencastle. 
Indianapolis 

A.  D.  Sullivan  

.   Assessor  

ceutical  Assn. 
Mayor  

Franklin. 

E.  B.  Swift  
Newton  M  Taylor 

.  County  auditor. 
Lawyer 

Co.  Commrs.  .  . 

Kokomo. 
Indianapolis 

G  J  Teshwell 

Farmer 

Linton 

B.  F.  Thiebaud  

.   Banker  

Connersville. 

E  B  Thomas 

Sec.  Peoples*  L'n 

Mayor 

Rushville 

John  A   Thompson 

and  Trust  Co. 
Banker               .  . 

Edinburg 

G.  L.  Thornton  

Mayor  

Surrey. 

S.  D.  Turner  
Wm.  E.  Turner.  .  . 

i 

Town  board  .... 

Glenwood. 
Lebanon. 

184 


INDIANA    UNIVERSITY 


Name. 
John  C.  Vanatta  

Jas.  Voorde  
Peter  Wallrath  
John  R  Welch 

Occupation. 

Editor  
Real  estate  and 

Appointed 
Delegate  by 
Prairie  Twp  .  .  . 
(White  Co.) 

State  League 

Address  » 

Brookston. 

South  Bend. 
Evansville. 
Indianapolis. 

Wm.  F.  Werner,  

Solomon  Weselbuford  . 
John  F.  White  

insurance. 
Druggist  

Farmer  
Manager  Ster- 

Building and 
Loan  Assns. 
Ind.  Pharma- 
ceutical Assn. 
Trustee  

Indianapolis, 
2144  E.  12th  St. 
Madison. 
Indianapolis 

G.  T.  Williams  

ling  Laundry. 
Farmer 

1545  Lexington. 
Kirklin. 

James  B.  Williams  .  .  .  . 

Assessor  

Mayor  

Huntington. 

G.  G.  Williamson  

Treasurer  Dela- 

Muncie. 

J.  D.Wilson  
J.  Wood  Wilson  
John  C.  Wingate  
E  H  Wolcott 

ware  County. 
Salesman  

Banker  and  man- 
ufacturer. 
Former  State 
Tax  Commr. 
State  Tax  Com- 

Mayor   

Indianapolis, 
2424  College  Ave. 
Marion. 

Wingate. 
Marion. 

P.  H.  Wolford  
Geo.  C.  Wood  
William  Allen  Wood... 

W.  L.  Wood  

missioner. 
Auditor  
Farmer  
Lawyer  

IVlayor  of  Rens- 

New  Castle. 
Windfall. 
Indianapolis, 
2502  N.  Alabama. 
Parr. 

A.  H.  Woodworth  
L.  H.Wright.  ..."  

Professor  Social 
Science. 
Farmer  

selaer. 
Hanover  Col- 
lege. 
Indiana  State 
Grange. 

Hanover. 
Columbus. 

APPENDIX  B 


General  Committee  on  Taxation  jof   the    Indiana   State 
Tax  Association 

(Appointed  by  the  Executive  Committee) 

Frank  C    Ball Muncie. 

Warren  Bigler Wabash 

Lewis  S.  Bowman Richmond. 

Thomas  D.  Brookshire Roachdale. 

C.  P.  Doney .  .. Indianapolis. 

Col.  Winfield  T.  Durbin '. . .' Anderson. 

George  Forrey Indianapolis. 

Samuel  M.  Foster Ft.  Wayne. 

Charles  Fox Terre  Haute 

J.  P.  Frenzel Indianapolis 

Jake  Gimbel '....• Vincennes. 

Fred  A.  Gregory Indianapolis. 

Ex-Governor  J.  Frank  Hanly Indianapolis 

James  A.  Houck : Indianapolis 

Judge  Timothy  Howard South  Bend. 

Hiram  L.  Irwin Frankfort. 

Aaron  Jones South  Bend . 

John  A.  Lapp Indianapolis. 

E.  I.  Lewis Indianapolis. 

C.  M.  Lindley Salem. 

Dan  M.  Link Auburn. 

John  M.  Lontz Richmond 

T.  C.  McReynolds Kokomo. 

M.  W.  Mix. Mishawaka. 

Will  J.  Mooney Indianapolis. 

Prof.  Thomas  F.  Moran LaFayette. 

Robert  W.  Morris New  Albany. 

Miss  Vida  Newsom Columbus. 

Edgar  A.  Perkins. Indianapolis. 

Alfred  Potts Indianapolis. 

Gov.  Samuel  M.  Ralston Lebanon. 

Mrs.  Samuel  M.  Ralston Lebanon. 

Prof.  Wm.  A.  Rawles Bloomington. 

Charles  F.  Remy Indianapolis. 

Judgs  John  L.  Rupe Richmond. 

Fred  A.  Sims Frankfort. 

Elliott  M.  Smith Advance. 

Marcus  S.  Sonntag Evansville. 

John  B.  Stoll , South  Bend. 

Evans  Woollen Indianapolis. 

Ebon  H.  Wolcott Indianapolis. 

(185) 


APPENDIX   C 


Constitution  of  the  Indiana  State  Tax  Association 

ARTICLE  I.     NAME 
The  name  of  this  organization  shall  be  the  Indiana  State  Tax  Association. 

ARTICLE  II.     OBJECTS 

(a)  The  encouragement  of  the  study  of  State  and  local  taxation  in 
Indiana. 

(6)  The  promotion  of  legislative  and  administrative  reforms  in  our 
taxing  system. 

(c)  The  publication  of  papers  and  other  materials  relating  to  revenue 
and  taxation. 

(d)  The    holding   of   meetings   for    conference    and    discussion    of   such 
questions. 

ARTICLE  III.    MEMBERSHIP 

(a)  There  shall  be  two  classes  of  members,  active  members  and  con- 
tributing members.  All  persons,  organizations,  and  institutions  interested 
in  the  question  of  taxation  shall  be  eligible  to  either  active  or  contributing 
membership.  Each  active  member  shall  be  entitled  to  one  vote  at  the  meet- 
ings of  the  conferences  arranged  by  this  association.  Contributing  members 
shall  not  be  entitled  to  any  vote  in  the  conferences. 

(6)  The  annual  membership  fee  for  the  active  members  shall  be  two 
dollars  ($2.00)  and  the  annual  membership  fee  for  the  contributing  members 
shall  be  ten  dollars  ($10.00) :  provided  any  contributing  member  may  give 
a  sum  in  excess  of  ten  dollars  ($10.00),  if  he  so  desires. 

ARTICLE  IV.    OFFICERS 

The  officers  shall  consist  of  a  president,  five  vice-presidents,  a  secretary, 
an  executive  secretary,  and  a  treasurer,  who  shall  be  elected  by  the  members 
of  the  association  at  the  time  of  the  annual  conference.  Until  the  next 
annual  conference  the  following  are  to  serve  as  the  officers: 

President,  WILLIAM  A.  RAWLES. 

First  Vice-President,  DAN  M.  LINK. 

Second  Vice-President,  JOHN  B.  STOLL. 

Third  Vice-President,  AARON  JONES. 

Fourth  Vice-President,  LEWIS  S.  BOWMAN. 

Fifth  Vice-President,  JOHN  A.  LAPP. 

Secretary,  FRED  B.  JOHNSON. 

Treasurer,  W.  K.  STEWART. 

Executive  Secretary,  FRED  A.  SIMS. 

(186) 


TAXATION    IN    INDIANA  187 

ARTICLE  V.    STANDING  COMMITTEES 

The  committees  of  this  association  shall  consist  of  an  executive  coTmrnittee 
and  such  other  committees  as  may  from  time  to  time  be  required  and  ap- 
pointed by  the  executive  committee. 

The  executive  committee  shall  consist  of  the  officers  of  the  association. 

The  officers  and  members  of  the  committees  shall  hold  their  positions  for 
one  year  or  until  their  successors  are  elected. 

ARTICLE  VI.     DUTIES  OF  OFFICERS  AND  COMMITTEES 

The  duties  of  the  officers  shall  be  such  as  usually  pertain  to  such  positions. 
The  executive  committee  shall  have  charge  of  the  general  interests  of  the 
association.  The  president  of  the  association  shall  at  all  times  be  a  member 
ex-officio  of  each  committee  appointed. 

ARTICLE  VII.    AMENDMENTS 

Amendments,  when  approved  by  the  executive  committee,  may  be  adopted 
by  a  majority  vote  of  the  members  present  at  any  meeting  of  the  association. 

ARTICLE  VIII.     ANNUAL  CONFERENCES 

This  association  shall  hold  at  least  once  each  year,  at  a  time  and  place 
to  be  determined  by  the  executive  committee,  a  conference  on  general  taxa- 
tion subjects  to  be  called  the  Indiana  Tax  Conference.  The  representation 
in  this  conference  is  to  be  on  the  following  basis:  (1)  Each  active  member 
of  this  association  is  to  be  ex-officio  a  member  of  the  conference  and  to  have 
one  vote;  (2)  Each  commercial,  occupational,  financial,  horticultural,  agri- 
cultural, and  professional  State  society  approved  by  the  executive  committee 
shall  be  entitled  to  be  represented  in  this  conference  by  two  voting  delegates; 
(3)  Each  city  or  town  in  this  State  is  entitled  to  one  voting  delegate  ap- 
pointed by  the  mayor  of  such  city  or  the  board  of  trustees  of  such  town;  (4) 
Each  county  in  the  State  and  each  township  in  the  State  is  entitled  to  repre- 
sentation by  one  voting  delegate  appointed,  respectively,  by  the  board  of 
county  commissioners  of  each  county  and  the  trustee  or  advisory  board  of 
each  township;  (5)  Each  commercial  club,  chamber  of  commerce,  or  similar 
civic  organization,  each  county  agricultural  society,  county  horticultural 
society,  the  central  labor  union  of  each  city,  and  any  other  local  organization 
approved  by  the  executive  committee  shall  be  entitled  to  one  voting  delegate 
each  in  the  conference;  (6)  Each  college  and  university  maintaining  a  course 
of  economics  is  to  be  entitled  to  one  voting  delegate  in  the  conference;  (7)  The 
State  Board  of  Tax  Commissioners,  the  State  Board  of  Agriculture,  and  the 
State  Board  of  Horticulture  shall  each  be  entitled  to  be  represented  by  one 
voting  delegate  in  the  conference;  (8)  There  shall  be  thirteen  delegates  at 
large  appointed  by  the  Governor  of  the  State,  one  from  each  congressional 
district,  each  delegate  having  one  vote. 


APPENDIX  D 


Analysis  of  Tax  Rates  in  Indiana 

RATES  FOB  1913 

The  average  1913  assessment  tax-rate  in  Indiana — that  is,  the  average 
rate  in  townships,  towns,  and  cities — was  $2.972  on  each  $100  of  assessed 
valuation.  The  1914  assessment  tax-rate,  which  will  govern  the  collections 
next  year,  is  considerably  more  than  $3.  This  means  that  the  average  tax- 
rate  in  Indiana  is  better  than  3  per  cent. 

This  was  the  summary  fact  produced  this  week  by  probably  the  first 
research  and  deep  analysis  of  tax-rates  ever  made  in  Indiana.  It  was 
made  by  representatives  of  the  Indiana  State  Tax  Association  and  the 
State  Tax  Board  and  its  chief  clerk,  Edward  Stenger,  and  checked  up 
through  the  State  Statistician's  office. 

Some  surprising  and  definite  totals  resulted.     Summarized,  they  are: 

The  average  rate  in  the  1,016  townships  of  the  State — that  is, 
"in  the  country" — was  $2.308  on  each  $100  on  the  1913  levy,  and  on 
the  1914  levy  will  be  at  least  2.4  per  cent. 

The  average  rate  in  the  393  towns  was  $3.023.  Marked  advances 
in  the  1914  levy  will  make  this  considerably  more  than  a  3  per  cent 
rate. 

The  average  rate  in  the  ninety-seven  cities  was  $3.585,  and  very 
marked  increases  will  make  the  1914  levy  at  least  a  3f  per  cent  rate. 

The  average  rate  in  the  ninety- two  county  seats  which  are  partly 
cities  and  partly  towns,  was  $3.484.  This  list  probably  furnishes  the 
fair  average  for  cities  and  towns.  Increases  in  the  1914  levy  will 
make  this  average  rate  for  towns  and  cities  just  about  3$  per  cent. 

The  general  supposition  has  been  that  high  tax-rates  were  especially 
the  burden  of  the  towns  and  cities.  In  the  popular  mind,  and  even  in  that 
of  many  well-informed  people,  the  "country  tax-rate"  has  been  looked  on  avs 
a  "1  per  cent  rate."  The  first  great  surprise,  therefore,  of  the  research 
is  the  unmistakable  proof  that  the  high  tax-rate  problem  has  reached  the 
country. 

Only  sixteen  counties  in  the  State  showed  an  average  township  rate 
under  2  per  cent,  and  every  one  of  them  was  hugging  that  figure  so  closely 
that  probably  in  the  1914  assessment  levy  the  list  will  be  cut  to  three  or 
four  counties  or  even  eliminated.  The  day  of  the  3  per  cent  tax  levy  in 
the  country  has  arrived — four  county  averages  and  scores  of  townships  are 
past  that  mark  in  the  1913  tax  levy  tabulations.  At  least  a  dozen  counties 
will  be  there  in  the  1914  assessment  levy. 

The  fact  that  the  average  rate  in  the  ninety-seven  incorporated  cities 
in  the  State  has  passed  the  3*  per  cent  mark  was  no  surprise  to  those  who 

(188) 


TAXATION     IN    INDIANA  IS!) 

a  year  ago  began  insisting  that  the  tax-rate  reports  that  came  out  in  the 
State  reports  were  not  correct.  Whether  resulting  from  oversight  or  an 
effort  to  cover  up  their  high  tax-rates,  many  cities  and  towns  have  been 
omitting  part  of  their  tax  levies  in  making  reports  to  the  State  Tax  Board 
and  the  State  Statistician.  This  fact  has  been  unearthed  only  recently  by 
the  State  Tax  Commissioners  and  the  students  of  taxation  who  wish  to 
know  just  what  the  situation  is.  This  work  has  been  very  trying  and  la- 
borious, as  special  reports  had  to  be  called  for  in  many  instances,  and  even 
the  tax  notices  published  in  the  county  papers  resorted  to,  in  correcting 
the  reported  rates.  It  would  seem  that  the  State  Board  of  Accounts  could 
perform  no  better  service  than  to  prepare  and  put  in  force  a  uniform  tax 
notice  and  a  form  for  reporting  all  items  entering  the  tax-rate  to  the  State 
authorities.  Until  this  is  done,  the  State  will  not  know  the  exact  situa- 
tion in  tax  matters,  except  by  resorting  again  to  such  a  survey  as  has  been 
made  in  this  instance. 

These  rates,  and  -those  of  towns  and  townships,  do  not  include  special 
assessments  of  various  kinds,  ranging  from  those  for  town  and  city  sewers 
and  streets  to  certain  road  assessments.  Comparisons  show  that  the  rates 
in  the  towns  and  cities  are  increasing  even  more  rapidly  than  in  the 
country,  and  the  1914  assessment  rates  will  be  considerably  higher,  taken 
as  a  whole,  than  those  given  in  the  1913  assessment  levy.  Some  Indiana 
cities  and  towns  may  pass  the  5  per  cent  mark  this  year — many  are  hug- 
ging it. 

It  was  from  the  two  lists — of  cities  and  towns — that  the  county  seat 
list  was  made  up  and  the  average  rate  of  $3.484  for  Indiana  county  seats 
was  obtained. 

These  figures  are  especially  valuable,  as  they  are  the  first  to  give  a  sub- 
stantial basis  for  analyzing  the  taxation  problem  which  is  attracting  so 
much  attention.  Money  is  now  worth  from  5  to  6  per  cent,  and  the  tax- 
rates  here  shown  mean,  if  the  law  is  enforced,  income  taxation  ranging — 
as  it  was  repeatedly  pointed  out  in  the  Indiana  State  Tax  Conference  with- 
out such  definite  tax-rate  figures  being  available— from  40  to  as  high  as 
92  per  cent. 

Other  property  is  capitalized  on  a  low  money  value  basis  and  the  tax- 
rate,  it  was  shown,  is  discouraging  investment.  Just  now  it  is  particularly 
depressing  to  Indiana  land  values,  because  money  for  transfers  can  not  be 
obtained  cheaply.  It  was  shown  in  the  State  Tax  Conference  that  the 
farmers  are  being  pinched  for  high  interest  rates,  largely  because  Indiana 
money  and  Indiana  men  of  means  are  being  driven  out  of  the  State.  Sena- 
tor Evan  Stotsenburg  cited  specifically  the  removal  of  twenty-four  families 
from  one  southern  Indiana  county  in  one  year  because  of  the  better  tax 
conditions  in  Kentucky.  At  the  State  Tax  Conferences  manufacturers  and 
other  business  interests  showed  how  the  conditions  in  Indiana  were  affect- 
ing industry  and  business  adversely. 

Attention  was  directed  in  that  conference  to  how  the  same  conditions 
had  arisen  within  the  last  few  years  in  practically  all  other  States,  and 
how  a  dozen  States— all  that  could  do  so  constitutionally — had  deserted 
the  old  general  property  taxation  system.  It  was  pointed  out  that  nine- 
teen more  States  are  seeking  the  opportunity  by  constitutional  amendments 
for  modernization  of  taxation  systems. 


190  INDIANA    UNIVERSITY 

The  reports  from  States  that  have  modernized  their  systems  showed 
that  on  very  much  lower  rates,  but  by  better  distribution  and  systems 
which  do  not  force  property  into  hiding,  considerably  more  revenues  were 
being  raised.  The  Indiana  State  Tax  Board's  report,  which  has  just  gone 
to.  press,  shows  that  the  Indiana  system  is  driving  Indiana  property  that 
is  easily  evasive  into  hiding,  or  into  nontaxables,  or  out  of  the  State.  There 
was  $5,404,747  less  property  of  this  character  on  the  tax-duplicates  in  1913 
than  in  1909.  This  means  at  least  $175,000  annual  loss  in  public  revenues, 
which,  with  the  otherwise  increasing  tax  load,  must  be  piled  up  on  visible 
property. — Indianapolis  News,  January  2,  1915. 

RATES  FOR  1914 

The  1914  tax  levy  notices  which  have  just  been  posted  in  the  ninety- 
two  Indiana  counties  for  the  1915  collection  this  spring  and  fall  reveal 
another  material  jump  in  taxes  over  the  State. 

The  direct  property  tax  collections  this  year  will  be  in  excess  of 
$45,000,000.  With  funds  raised  by  other  means  than  by  direct  general 
property  taxation,  the  total  amount  of  revenue  raised  in  Indiana  this  year 
will  be  in  excess  of  $50,000,000. 

The  official  notices  have  been  gathered  by  the  State  Statistician's  de- 
partment. It  has  not  yet  had  time  to  make  official  summaries.  Represen- 
tatives of  the  Indiana  State  Tax  Association  have,  however,  been  given 
access  to  the  reports  and  have  made  some  hasty  surveys. 

Some  startling  conditions  have  been  revealed.  These  are  some  of  them : 

The  5  per  cent  tax-rate  has  been  reached.  Five  Indiana  towns 
and  cities  have  a  levy  this  year  of  $5  or  more  on  each  $100  of 
assessed  valuation.  One  is  within  eight  cents  of  $6.  Thirty-six 
towns  and  28  cities  have  more  than  a  4  per  cent  tax-rate  this  year. 

The  average  rate  of  the  393  towns  in  the  State,  which  on  the 
1913  levy  collected  last  year  was  $3.023,  has  jumped  to  $3.093. 

The  average  rate  in  the  97  cities  has  jumped  in  the  year  from 
$3.585  to  $3.726,  which  means  that  it  is  very  near  a  4  per  cent  rate. 

The  average  tax-rate  in  the  country — that  is,  in  the  townships 
outside  of  cities  and  towns — which  last  year  was  found  to  be  $2.308, 
has  advanced  to  over  $2.40,  which  means  that  the  country  tax-rate 
has  advanced  to  an  average  of  almost  2£  per  cent. 

The  revelations  of  the  1914  tax  notices  confirm  the  statements  made 
in  the  Indiana  State  Tax  Conferences  by  former  State  Tax  Commissioner 
Fred  A.  Sims,  that  if  the  present  Indiana  tax  laws  were  enforced,  the 
doors  of  practically  every  bank  in  the  State  would  be  closed,  for  the  rates 
have  now  reached  a  point  where,  if  they  are  not  confiscatory  of  earnings 
on  deposits  and  standard  securities,  they  are  so  oppressive  that  depositors 
and  others  would  not  permit  their  money  to  be  where  it  would  be  reached 
by  the  tax-listing  officials. 

The  rate  on  standard  securities  now  is  on  about  a  5  per  cent  basis. 
The  tax-rate  is  as  high  as  the  rate  of  earnings  on  money  in  some  commu- 
nities. The  report  of  the  State  Tax  Board  to  the  present  legislature  and 
the  recent  State  Tax  Conference  showed  that  the  present  system  of  taxation 


TAXATION    IN    INDIANA  191 

bad  got  so  far  "out  of  joint  with  economic  conditions"  that  it  is  driving 
money  out  of  the  State  and  into  tax-evading  forms,  and  that  it  also  is 
driving  people  of  means  out  of  the  State  and  cramping  the  vsupply  of 
money  which  Indiana  agriculture  and  other  industry  demands. 

The  towns  and  cities  which  have  reached  or  passed  the  5  per  cent  tax- 
rate  point  are  Royal  Center,  which  has  a  $5  rate;  Decatur  and  Knox, 
which  have  a  rate  of  $5.15 ;  East  Chicago,  which  has  a  rate  of  $5.68 ;  and 
Hammond,  whose  rate  is  $5.92  this  year.  The  application  of  the  tax  in 
all  of  these  points  would  take  all  of  the  return  from  a  5  per  cent  invest- 
ment and  leave — except  in  Royal  Center  where  the  taxing  authorities 
would  only  take  all — the  holder  of  the  investment  owing  the  taxing  au- 
thorities money.  It  is  an  admitted  fact  that  in  all  of  the  high  taxed  cen- 
ters money  in  its  various  forms  has  been  driven  off  the  tax-lists,  simply 
because  "it  could  not  live"  under  a  3  or  3.5  to  5.92  per  cent  tax-rate. 


APPENDIX   E 


Some  References  on  Taxation 

Bastable,  C.  F.     Public  Finance.     New  York,  1903.     Macmillan.     Price,  $4.25. 

Bullock,  C.  J.  (Ed.).  Selected  Readings  in  Public  Finance.  New  York, 
1906.  Ginn  &  Co.  Price,  $2.50. 

Fiilebrown,  C.  B.  The  A,  B,  C,  of  Taxation.  Boston,  1912.  C.  B.  Fille- 
brown,  77  Summer  St.  Price,  25c. 

Fillebrown,  C.  B.  A  Single  Tax  Handbook.  Boston,  1913.  C.  B.  Fiile- 
brown, 77  Summer  St.  Price,  25c. 

Hollander,  J.  H.  (Ed.).  Studies  in  State  Taxation.  Baltimore,  1900.  The 
Johns  Hopkins  Press.  Price,  $1.25. 

Means,  D.  M.  Methods  of  Taxation.  New  York,  1909.  Dodd,  Mead  &  Co. 
Price,  $2.50. 

Plehn,  C.  C.  Introduction  to  Public  Finance.  New  York,  1911.  Macmillan. 
Price,  $1.75. 

Seligman,  E.  R.  A.  Essays  in  Taxation.  New  York  (8th  ed.),  1913.  Mac- 
millan. Price,  $3.00. 

Seligman,  E.  R.  A.  Progressive  Taxation.  Ithaca,  New  York,  1908.  Ameri- 
can Economic  Association.  Price,  $1.75. 

Seligman,  E.  R.  A.  The  Shifting  and  Incidence  of  Taxation.  New  York, 
1910.  Columbia  University  Press.  Price,  $3.00. 

Seligman,  E.  R.  A.  The  Income  Tax.  New  York,  1914.  Macmillan.  Price, 
$3.00. 

Proceedings  of  the  Conferences  of  the  National  Tax  Association,  1907-1914. 
Secretary,  Dr.  T.  S.  Adams,  Madison,  Wisconsin.  Issued  to  members 
of  the  Association  at  $1.00  per  volume.  Annual  dues  in  the  Associa- 
tion, $5.00  per  year.  Volumes  issued  to  non-members  at  $2.00  for 
1907-12;  at  $3.00  for  1913-14. 


(192) 


Indiana  tax 


"Proceedings 


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